How to Calculate Home Equity

By Lauren Rosales-Shepard, Content Writer



“Home equity” is, by textbook definition, the difference between the current market value of a home and the outstanding balance of any mortgages or liens secured by the property. In plain English, it represents the portion of the home that the homeowner effectively owns outright.

Understanding your home equity percentage empowers you to make informed financial decisions, manage debt effectively, and build wealth over time. This information is integral to assessing your overall financial position and net worth. Knowing your home equity is valuable; you can make an informed decision to borrow against it or sell the property to realize the equity as cash.

Simple Steps to Determine Home Equity

What follows is a simplified approach to determining your home equity. In order to obtain the most precise picture of your home equity situation, consider ordering a professional appraisal or consulting with a financial advisor.

1. Find your home’s current market value.

   
   You can estimate your home's current market value by using various methods, such as hiring a professional appraiser to conduct a valuation, checking recent sales prices of comparable properties (comps) in your neighborhood, and using online real estate valuation tools or websites (Zillow is a popular one).
   
   

2. Calculate your outstanding mortgage balance.

   
   Obtain the most recent statement from your mortgage lender or servicer; it outlines the remaining principal balance of your mortgage(s), including any accrued interest and fees.
   
   

3. Subtract your mortgage balance from your home's market value.

   
   Subtract your outstanding mortgage balance from your home's current market value. The result equals your home equity. For example, if your home is valued at $500,000 and you still owe $200,000 on your mortgage, your home equity would be $300,000.

How to Increase Your Home Equity

Home equity can grow over time and your property value may naturally appreciate, but there are strategies you can control to grow home equity more quickly.

• Regular Maintenance and Upkeep: Keep your home well-maintained by promptly addressing repairs and maintenance concerns. Regular maintenance can help preserve the value of your property and prevent more minor issues from escalating into costly problems.
• Home Renovations and Improvements: Invest in renovations and improvements that can increase the value of your home. Focus on projects that offer a high return on investment (ROI), such as kitchen and bathroom remodels, adding square footage, upgrading energy-efficient features, or greatly enhancing curb appeal.
• Reducing Mortgage Debt: Pay down your mortgage principal more quickly by making extra payments or refinancing to a shorter loan term. When you reduce your mortgage balance, you effectively increase your home equity.

How to Use Your Home Equity

Built-up home equity can be a financial tool to help you achieve life goals. For example:

• tackle home improvement projects
• pay off debt
• advance your career or start a business
• fund big purchases (wedding, college, new car, medical bills, etc.)
• supplement retirement income
• down payment on a home

Put your Home Equity to Work and Achieve Your Life Goals with Unison

Unison designed the Equity Sharing Home Loan to empower homeowners with financial agency and flexibility. The innovative financial structure benefits of this 10-year, fixed interest-only loan unite to offer the savvy homeowner a smart alternative to traditional home equity financing.

The Equity Sharing Home Loan features:

• Interest-Only Payments: Dramatically lower monthly obligations
• 10-Year Term: Extended timeframe for reaching your financial objectives
• Flexible Payment Options: No prepayment penalties
• Home Improvement Value Recognition: Eligible for credit from property improvements
• Capped Returns: Predictable sharing structure for peace of mind
• Aligned Interests: Unison succeeds only when you succeed
• Improved Cash Flow: Keep more money in your pocket each month
• Investment Opportunities: Use freed-up cash to invest elsewhere
• Debt Consolidation Power:Effectively streamline your finances
• Increased Financial Flexibility: Maintain control of your financial future

While every homeowner's situation is unique, Unison's Equity Sharing Home Loan opens up exciting new possibilities for those seeking to leverage their home's value. If you’re interested in accessing your equity with half the monthly payment as traditional financing options, learn more about Unison’s revolutionary approach to home equity today.



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