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How to Calculate Home Equity and Unlock Funds You Need
HomeLight
Real Estate
4 months ago
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While it may initially seem complex, how to calculate home equity is actually quite simple. What may be more difficult is deciding how and when to use your home equity.

Unlocking funds from your home can bring exciting life changes or be a well-timed financial lifesaver.

In this post, we’ll show you four easy steps to calculate your home’s equity and help you tap into what you need — and what to consider before you do.

A quick (and free) way to check your home value

Get a preliminary home value estimate in as little as two minutes. Our tool uses information from multiple sources to give you a range of value based on current market trends.

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How to calculate your home equity

Calculating your home equity involves a few simple steps, which we’ll share below.

Many banks and lending companies also provide online home equity calculators. But whether you use a commercial website tool or prefer your own calculator, you’ll first need to determine your home’s estimated value and how much you still owe on your mortgage.

Step 1: Determine your home’s value

The first step in calculating your home equity is determining your home’s current fair market value. The market value of your home refers to what a homebuyer would likely pay to purchase your property right now. You can do this by:

To get a preliminary estimate on what your home may be worth, try HomeLight’s Home Value Estimator. Simply answer a few questions about your home. This free tool analyzes the records of recently sold homes near you, your home’s last sale price, and other market trends to provide a ballpark range of value in under two minutes.

When it comes time to apply for an equity-based loan, lenders will typically use your home’s professionally appraised value to determine your total equity and how much you can borrow.

Step 2: Find your current mortgage balance

Next, you need to find your current mortgage balance. This information is often available on your latest mortgage statement or by logging into your lender’s online portal or app. You can also email or call your lender to ask for your current loan balance.

Step 3: Subtract the loan balance from your home value

Once you have both your home’s value and your current mortgage balance, subtract the loan balance from the home value. The formula looks like this:

Step 4: Convert the difference into a percentage

To convert your home equity into a percentage, use the following formula:

This percentage represents how much of your home you truly own and can access for financial needs. As you can see in our example, the equity in this home is more than half the property’s current value.


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