Money and Home

We are going to be talking about a question that so many Utah homeowners might be wondering, what is equity and how do we calculate it? Understanding the equity of your home is important as it will affect whether you can sell your home or not, or maybe if there's cash that you can tap into for paying student loans, a new car, or maybe a boat.

Understanding Home Equity

Understanding what equity is will require a little bit of math, but don't worry. It doesn't require a statistics degree and it's not that difficult. Once you understand, it's pretty simple. Let's say that you have a house with a value of $100,000 and a mortgage of roughly $70,000. This means you have an equity position of $30,000. The formula is simple. Take the value of your home and subtract your mortgage balance from it to get your equity.

In the example above, let's say that you ran into some money, maybe you got an inheritance from your parents and you decided to take that money and pay down some of the mortgage that you owe to let's say roughly a balance of $40,000. Now you have an equity position of $60,000 or $100,000 minus $40,000. You can see that as you pay your mortgage down, the amount of equity you have increases. But it's important to understand that your equity position may not always increase and that's because home values can fluctuate.

Let's say that a house that was worth $100,000 is now only worth $80,000. If you still owe $40,000 on the property, your equity position went from 460,000 to only $40,000. In a market where house values decrease, it's possible to watch the amount of equity you have also decrease. It's also possible for that value to even go negative, and this is what we call a house being underwater. It was the position that many homeowners were in during the 2008, 2009 financial crisis, where most people owed more on their house than their house was worth.

Find your Utah Homes Value

How can you calculate the equity of your own Utah home's value? First, grab your latest mortgage statement and find your current mortgage balance. If you have any open equity lines that you might have tapped into, you'll want to grab those too, because we want a complete picture of how much you owe on your property. Then total up the amount that you owe and go ahead and just write that down for now and put it to the side because next, you're going to need to figure out your home's value. You'll probably be tempted to use online sites like Zillow, Realtor.com or even Nerdwallet to determine your home's value. There's nothing wrong with these sites, but you are going to get a ballpark answer and I don't know about you, but if I'm making a decision or sell my property, I don't necessarily want a ballpark number.

The best way to figure out the value of your home is to call us we are licensed Utah real estate agents and can do a in-depth market analysis for you that will give you the most accurate home value that you can get other than paying for an appraisal. In our market analysis, we look at comparables homes that have sold in your area in the last six months to get a rough estimate of how much your home is worth.

Once you have the value of your home and your mortgage balance, go ahead and take those two numbers to calculate your equity position. Take your home's value minus your mortgage balance to equal your equity, and you now know how much equity you have in your home.

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