Real estate & rental
Real Estate Home Equity Calculator
Works home equity, which is value less what is owed and nothing more.
Result
An arithmetic tool, not financial or legal advice. Lending criteria, tax treatment and tenancy law all vary by state and change regularly. Confirm anything that affects a decision with a lender, an accountant or an attorney. Available equity is not free money: borrowing against a home secures the debt on it, and a fall in value can leave you owing more than it is worth. Lenders also use their own appraisal rather than an owner's estimate, and it is frequently lower.
Get a Free Business AuditHow the calculation works
Current market value less the outstanding balance on all loans secured against the property. The usable portion is smaller, because lenders will only lend up to a share of value and because selling costs come out of the proceeds, so equity on paper and equity available are two different figures.
What moves the number
- Current market value, which is an estimate rather than a fact.
- All secured balances, including second liens and lines of credit.
- The loan-to-value limit a lender would apply.
- Selling costs, if the equity would be realised by selling.
Where this one goes wrong
Value is an estimate until a sale, and automated estimates can be wide of the mark in either direction on an unusual property, so equity calculated from one is provisional. The accessible figure is also lower than the paper figure in both directions of use: borrowing against it is capped at a share of value, and realising it by selling costs a meaningful percentage in transaction costs. Treat the paper number as the ceiling.
Before you quote
- Include every secured balance, not just the first mortgage.
- Treat an automated value estimate as provisional.
- Deduct selling costs if the equity would be realised by selling.
Questions
About this calculator
How much of my equity can I actually use?
Less than the paper figure. Lenders cap borrowing at a share of value, and realising equity by selling costs a meaningful percentage in transaction costs. The calculated figure is the ceiling rather than the amount available.
How reliable is an automated value estimate?
Reasonable for conventional properties in active markets and poor for unusual ones, where it can be wide of the mark in either direction. Equity calculated from one is provisional, and an appraisal or a broker's view is worth having before relying on it.
Does paying down principal build equity faster than appreciation?
Early in a loan the principal portion of each payment is small, so most early equity change comes from value movement. The principal share grows over the term, which is why the two sources trade places as the loan ages.
The formula
equity = value - all debt secured on the property; available = value x maximum LTV - existing debt
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How to use this calculator
- Current market value ($). Enter your own figure; the page starts at $470,000.
- First mortgage balance ($). Enter your own figure; the page starts at $268,000.
- Other loans against the property ($). Enter your own figure; the page starts at $0.
- Maximum combined LTV a lender allows (%). Enter your own figure; the page starts at 85%.
The result updates as you type, so you can try a figure, see what it does to equity, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Current market value | $470,000 |
| First mortgage balance | $268,000 |
| Other loans against the property | $0 |
| Maximum combined LTV a lender allows | 85% |
What comes out
| Result | Value |
|---|---|
| Equity main result | $202,000 |
| Current loan to value | 57.02% |
| Available to borrow | $131,500 |
| Equity as a share of value | 43.0% |
| LTV if you borrowed it all | 85.0% |
Equity is $202,000, 43.0% of value, at an LTV of 57.02%. A lender allowing 85 combined LTV would lend up to $131,500 more.
How sensitive the answer is
Holding everything else steady and changing only current market value, this is what happens to equity. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Current market value ($) | Equity |
|---|---|
| $235,000 | -$33,000 |
| $352,500 | $84,500 |
| $470,000 example above | $202,000 |
| $705,000 | $437,000 |
| $940,000 | $672,000 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Current market value ($)
- A money amount, starting at $470,000.
- First mortgage balance ($)
- A money amount, starting at $268,000.
- Other loans against the property ($)
- A money amount, starting at $0.
- Maximum combined LTV a lender allows (%)
- A percentage, between 0 and 100, starting at 85%.
What the results tell you
| Result | What it is |
|---|---|
| Equity | The headline result. A money figure. |
| Current loan to value | A percentage. |
| Available to borrow | A money figure. |
| Equity as a share of value | A percentage. |
| LTV if you borrowed it all | A percentage. |
What is not in this number
Property figures here exclude the costs that decide whether a deal works: vacancy, maintenance, management, capital expenditure and the transaction costs at both ends. A return that looks strong before those frequently does not survive them.
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