How to Determine How Much
Equity Your Home Has
home equity articles and tips
The equity in your home can work to your benefit in many different ways. You can use it to complete renovations around your home or even to cash out your equity balance. Here are some steps to take in order to calculate how much equity your home has for you to utilize.
Calculate Your Remaining Loan Balance
Your monthly mortgage statement likely has the outstanding balance for the remaining amount that you owe on it. This doesn't necessarily mean that your home is worth this amount of money. It's simply stating that this is the remaining amount of money that you owe from the original amount that you borrowed to make your home purchase. In the beginning, the large majority of your monthly payments go towards interest. With time, more and more of the payments will go towards the principal amount.
Figure in Other Outstanding Obligations
In some instances, you may have taken out a home line of credit or have some other financial obligations on your home, such as a lien. This amount will have to be figured out and substracted from the total value of your home. The remaining balance can give you a better idea about how much equity you have in your home that is available for your use.
Evaluate Your Options
An appraisal gives you a rough idea of the value of your home. Many appraisers will use comps in the area to determine the price point. This doesn't guarantee that your home will sell for this amount. It's simply a rough estimate based on the current market value and the quality of finishes that your home has to offer. This will give you a baseline of what you could ask for your home if you wanted to purchase one of many new homes for sale.
Examine Your Comps
Do some research and determine the comparable homes to your own home in the area. You have to look at the sold price instead of the list price. This is because a house can be listed for any amount. The important part is what someone is willing to pay for it. This is the amount that you could most likely consider for the value of your home. You'll have to determine if the comps are in line with what the appraiser stated for the value of your home.
Determining the amount of equity that your home has to offer can give you some peace of mind. This will allow you to know that you can use the equity to your advantage or even sell your own home for an upgraded model.
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