How Is Housing Equity Calculated?

Housing equity equals a home's value minus mortgages and liens.

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Home equity is the portion of your home’s value that is free from liens and mortgages. If you sell your house and pay off these debts, you would walk away with an amount of cash that is about equal to your equity. Housing equity increases your overall wealth and can grow over time as your house increases in value and as you pay down your mortgage. It can also decrease if your home value falls or if you take on a new and bigger mortgage. If your home value drops below your mortgage and lien balances, you’ll be “underwater” with negative equity.

Step 1

Estimate your home’s current market value. You can find this information on websites that give free home value estimates. You can also contact a real estate agent in your area to request a free estimate of your home’s value or to request prices of homes similar to yours that have recently sold in your neighborhood. Similar houses in the same area typically sell for around the same price. For example, if a house on your street with the same square footage as yours recently sold for $650,000, your home would be worth about the same amount.

Step 2

Find, on your most recent billing statements, the outstanding balance of any mortgages you have on your property, including a first mortgage, second mortgage or home-equity line of credit.

Step 3

Determine the amount of any liens that have been placed on your home, such as a lien for unpaid taxes. You can contact the county recorder’s office for the county in which your house is located to find the amount of any liens.

Step 4

Subtract the amount of mortgages and liens from your home’s current market value to determine your equity. A negative result represents negative equity. For example, assume your home’s current market value is $800,000, you have a $500,000 first mortgage and a $50,000 balance on a home-equity line of credit. Subtract $500,000 and $50,000 from $800,000 to get $250,000 in home equity.