How Much Equity Do You Have in Your Home?

The dream of home ownership is about more than just a stable place to live, exempt from the whims and decisions of landlords. For many, home ownership is a piece of the wealth building picture, essential to a future retirement or financial independence. The idea is pretty basic: You purchase a home and pay it down while hoping the value of the home increases over time. Generally speaking, this is what happens over a long enough period of time. As you go, you build what’s called “equity.”

What is Equity

Equity is defined as “the market value of a homeowner’s unencumbered interest in their real property—that is, the sum of the home’s fair market value and the outstanding balance of all liens on the property.” If you were to sell your home and pay off the balance of the mortgage (and any other debts, such as home equity credit lines or liens), the cash you would have leftover is your equity. Your “equity position” changes over time due to a variety of factors.

As you’ve probably noted, the biggest variable in your home equity position is the home’s true market value. A variety of factors can influence your home’s value, including: Market demand for homes in your area, local amenities, schools, your home’s particular features, upgrades you’ve made, condition issues, plus quite a bit more. So how can you tell your equity position?

First, you need to know what you owe on your home. This is as simple as checking your mortgage statement to see what your principle balance is on the loan. This number can differ slightly from your actual payoff amount due to closing dates, interest, and other issues determined during the sale, but generally speaking, your principle balance is the number you need to know. If you have any other debt on the home, you need to add the value of this debt to the principle balance. This, for example, might include credit lines, liens, or second mortgages.

Home Value

Next, you need to know the value of your home. While there are sites such as Zillow and Trulia out there which will tell you what your home’s value is, these “automated valuation models” are generally not very accurate when it comes to your home’s value, as they exclude many crucial factors. Often, they come in quite a bit higher. They can, however, give you an idea of general changing trends in your market over time.

Hiring an appraiser is one way to determine your home’s value from a more bank-like perspective. While an actual sale may be above the appraisal, this thorough, conservative option is a good way to go. The downside? You may have to pay up to $500 for the appraisal.

On-line Evaluation

We have made it really easy for you to determine the value of your home.  Simply enter your address on this page on our website and it will give you a list of homes that have sold near you, as well as a personalized home valuation.  This page also gives you a summary of the housing market in your area.  (Wow, I love technology!)

Knowing the correct value of your home is crucial when it comes to selling your home.  Having a home priced correctly is one of the number one reasons homes sell fast.  On the flipside, price a home too high, it can cause the home to sit on the market too long.  The right price is vital.  Get in touch today if you want to learn more at 928-277-6404.