Whether you’re interested in selling, refinancing, or taking out a home equity line of credit (HELOC), you’ll need to know the amount of equity that you have in your home.
The first step is to take a look at your monthly mortgage statement to get a sense of your outstanding balance. If you’re like most Americans, you might not even think to check the big number on your statement more than once per year (and after all, it’s a number that we tend to avoid looking at for too long). For the sake of this example, let’s say you still owe $200,000 on your home loan. If you have a second mortgage or any liens on your home, add those totals to this number as well.
The next step is to consider the current market value of your home – and this is where it can get tricky. If you’re refinancing, you’ll be required to get a professional appraisal of your property. They can typically be scheduled within a week or two and cost a few hundred dollars. If you’re just curious about your home’s value, however, a real estate agent can assist you by providing you with a Comparative Market Analysis (CMA) which will provide you with an estimated value based on similar properties that recently sold nearby. For this example, let’s say your real estate agent estimated that your home is worth approximately $250,000.
To calculate your equity, you simply deduct the total of any mortgages and/or liens from your home’s current market value. In this case, the homeowner has approximately $50,000 in the home. To calculate the loan-to-value ratio, you divide the total of the mortgages and/or liens by the current market value — in this case, the LTV ratio is 80%.