Formula for Home Equity

Layer-visible-off
1
Unfavorites
0

What is the formula for home equity? Is it fair market value minus amount owed on property?


0
correct_answer

You are correct!

Home Equity = (Fair Market or Appraised Value of your home) – (All Current Existing Liens on your home.)

If you have a fair amount of equity in your home you may consider getting a home equity line of credit. This is a form of credit where your house is used as collateral. One of the advantages to getting a home equity line of credit is the interest paid is usually fully tax deductible. Please ask your accountant to verify. Another advantage is that the interest rate is usually relatively low. A home equity line of credit can be a great source for debt consolidation, college tuition, medical bills, or home improvements.

Answered almost 7 years ago

1

Yes.  Home Equity is derived by taking the current fair market value of the home less any liens on the property.

For example: $100,000 appraised value and a $60,000 mortgage = $40,000 in home equity.

$100,000 appraised value and a $60,000 1st mortgage and a $20,000 2nd mortgage = $20,000 in home equity.

$100,000 appraised value and a $60,000 1st mortgage and a $20,000 2nd mortgage and a $5,000 property tax lien = $15,000 in home equity.

$100,000 appraised value and a $60,000 1st mortgage and a $20,000 2nd mortgage and a $10,000 mechanics lien = $10,000 in home equity.

If you are selling your home, then remember to factor in any realtor’s commissions and transaction costs to calculate your home equity.

Answered almost 6 years ago

You Must Be Logged In To Answer