The Available Equity Calculator is a tool used to determine the equity you have in your property. Equity is an important aspect of property ownership, representing the difference between the property’s current market value and any outstanding loans or mortgages. This calculation helps homeowners understand their financial standing and potential borrowing power.
Formula
The formula for calculating available equity is:
Equity (E) = Property Value (P) – Loan Balance (L)
Where:
- E = Available Equity
- P = Current Market Value of the Property
- L = Outstanding Loan Balance
How to Use
- Enter the current market value of your property in the “Property Value” field.
- Enter the outstanding loan balance in the “Loan Balance” field.
- Click the “Calculate” button to determine the available equity in your property.
Example
If your property’s current market value is $300,000 and the outstanding loan balance is $150,000, the calculation would be:
Available Equity (E) = $300,000 – $150,000 = $150,000
This means you have $150,000 in available equity.
FAQs
- What is available equity?
Available equity is the difference between the current market value of your property and the outstanding balance on your loan or mortgage. - Why is calculating available equity important?
It helps you understand how much of your property you actually own and can be useful when considering refinancing, taking out a home equity loan, or selling your property. - How does the property value affect available equity?
The higher the property’s market value, the greater the available equity, assuming the loan balance remains the same. - What happens if my loan balance is higher than the property value?
If your loan balance exceeds the property value, you have negative equity, which means you owe more than the property is worth. - Can I use this calculator for any type of property?
Yes, this calculator can be used for residential, commercial, or any other type of property as long as you have the current market value and loan balance. - How often should I calculate my available equity?
It’s a good practice to calculate your available equity periodically, especially if you are considering refinancing, selling, or borrowing against your property. - What if my property value has decreased?
If the property value has decreased, your available equity will also decrease, potentially affecting your borrowing power. - Does available equity affect my mortgage payments?
No, available equity does not directly affect your monthly mortgage payments, but it can influence your ability to refinance or take out a home equity loan. - Can I access all of my available equity?
Not necessarily. Lenders typically allow you to borrow up to a certain percentage of your available equity, commonly 80-90%. - How can I increase my available equity?
You can increase your available equity by paying down your loan balance or by increasing the property’s market value through home improvements or market appreciation. - Is available equity the same as home equity?
Yes, available equity and home equity refer to the same concept—the portion of your property that you own outright. - How does refinancing affect available equity?
Refinancing can affect your available equity by changing the loan balance. Cash-out refinancing, for example, increases the loan balance and decreases available equity. - What if I have more than one loan on my property?
If you have multiple loans, add up the balances of all loans to get the total loan balance for the calculation. - Can available equity be negative?
Yes, if the loan balance exceeds the property value, the available equity can be negative, indicating that you owe more than the property is worth. - Does available equity include the down payment?
Yes, available equity includes the down payment and any subsequent payments that have reduced the loan balance. - Is the property value used in the calculation the purchase price or current market value?
Use the current market value of the property, not the original purchase price, for an accurate calculation. - How does an increase in property value affect equity?
An increase in property value increases your available equity, provided the loan balance remains the same. - Can I use this equity for investment purposes?
Yes, many homeowners use their available equity for investment purposes, such as purchasing additional property or investing in other assets. - How accurate is the equity calculated using this tool?
The accuracy depends on the accuracy of the property value and loan balance figures you provide. - Does this calculator consider property taxes and insurance?
No, this calculator does not consider property taxes, insurance, or other costs associated with property ownership.
Conclusion
The Available Equity Calculator is a valuable tool for homeowners and property investors to determine their financial standing concerning their property. By understanding your available equity, you can make informed decisions about refinancing, borrowing, or selling. Regularly calculating your equity helps you stay on top of your financial situation and leverage your property’s value effectively.