# Calculating Home Equity

If you need an affordable loan to cover unexpected expenses or pay off high-interest debt, you should consider a home equity loan. A home equity loan is a financial product that lets you borrow against your home’s value. Keep reading to learn how to calculate your equity.

## Know Your Home’s Value

The amount of equity that you have in your home is equal to its value minus any outstanding loans. To calculate your equity, you need to know your home’s value.

When you apply for your home equity loan, your lender may require an appraisal to determine your property’s value. However, you have options to estimate the value beforehand. One alternative is to use an online valuation tool. These tools use information from public records and nearby home sales to approximate your home’s value, notes Nerd Wallet.

You can also contact a local real estate agent to approximate your home’s value. The agent can evaluate your home’s specific characteristics and use market data to calculate the value.

## Look Up the Balance on Any Outstanding Home Loans

Now that you have an idea of your home’s value, you need to look up the balances on any loans that use your home as collateral. A home mortgage is one of the most common types of loans secured by your home.

You can check the balance of your mortgage by looking at a recent loan statement or logging into your lender’s website. Another option is to call the lender and inquire about the current payoff amount for your loan.

## Subtract Your Outstanding Loans from Your Home’s Value

It’s simple to calculate the equity in your home; just subtract the number of your outstanding home loans from your home’s value. Assume that your home is worth \$200,000 and that you have an outstanding mortgage with a balance of \$150,000. Subtract \$150,000 from \$200,000 for a final number of \$50,000. This indicates that you have \$50,000 of equity in your home.

## Make Sure You Have Ample Equity for a Loan

Some lenders fund a home equity loan up to 80 or 90 percent of your home’s value, reports Investopedia. If your home is worth \$200,000, 80 percent of its value is equal to \$160,000 and 90 percent of the value is \$180,000.

Assume that you owe \$150,000 on your home and that your lender permits home equity loans up to 90 percent of the property’s value; this means you can borrow up to \$45,000.

## Understand the Difference Between a Home Equity Loan and Line of Credit

When you’re exploring home equity products, you’ll encounter two common options: the home equity loan and the home equity line of credit. A home equity loan is an installment product with a fixed term, specific interest rate and fixed monthly payment. You receive all of the loan proceeds at once.

A home equity line of credit is a revolving product that lets you access the money as you need it, similar to a credit card. Your payment is a specific percentage of your outstanding balance. The interest rate varies based on a specific financial index.