How Much Home Equity Have You Gained? The Answer Might Surprise You

As a homeowner, one of the most powerful financial tools at your disposal is your home equity. Equity represents the difference between what you owe on your mortgage and what your home is currently worth. Over time, as you pay down your mortgage and your home increases in value, your equity grows. The key question is: How much home equity have you gained, and how can you leverage that to your advantage?

Understanding Home Equity

Home equity is simply the portion of your home that you truly "own." It’s calculated by subtracting the remaining balance on your mortgage from the current market value of your home. For example, if your home is worth $350,000 and you owe $200,000 on your mortgage, your home equity is $150,000.

There are two ways home equity can increase:

Paying down your mortgage: As you make your monthly payments, your principal balance decreases, increasing your equity.
Appreciation in home value: If the market value of your home rises due to factors such as market conditions or improvements you’ve made to the property, your equity will increase even if you haven’t made extra mortgage payments.

How Much Equity Have You Gained?

You might be surprised by how much home equity you’ve gained, especially given the fluctuations in the housing market. If you’ve owned your home for several years, you’ve likely built up more equity than you realize. Here's a quick breakdown of factors that contribute to your equity growth:

Rising Home Prices: In many markets, home values have surged in recent years. According to recent reports, home prices have increased by an average of 10-15% over the last few years, significantly boosting homeowners' equity.
Mortgage Payments: Even without making extra payments, each month’s mortgage payment is reducing the loan balance. Over time, this gradual reduction adds up, helping you gain more equity.
Home Improvements: If you've made any improvements or upgrades to your home—like renovating the kitchen, adding a deck, or improving the landscaping—this could have boosted your home’s value and, consequently, your equity.
Refinancing: If you’ve refinanced your mortgage in the past and secured a lower interest rate, your monthly payments may have gone down, allowing you to pay off your loan more quickly and increase your equity at a faster pace.

Why Does Home Equity Matter?

Your home equity can be an important tool for your financial future. Here are a few ways to leverage it:

Home Equity Loans or HELOCs: You can tap into your equity by borrowing against it. A home equity loan or a Home Equity Line of Credit (HELOC) can be used for a variety of purposes, such as paying off high-interest debt, financing home renovations, or even funding a child’s education.
Selling and Downsizing: If you're looking to downsize, the equity in your current home can be used as a down payment on a new home, possibly with a smaller mortgage.
Retirement Planning: Home equity can be a significant part of your retirement plan. If your home has appreciated considerably over time, you could sell it and use the proceeds to fund your retirement, giving you additional financial security in your later years.

How to Check Your Home Equity

To get an accurate estimate of your current home equity, you can follow these steps:

Estimate Your Home’s Value: Use an online home valuation tool (like Zillow or Redfin), or better yet, have a professional appraisal done to get a more accurate estimate of your home’s market value.
Check Your Mortgage Balance: Log into your mortgage lender's online portal, or refer to your latest statement to see how much you owe.
Calculate Your Equity: Subtract the amount you owe from the estimated value of your home. The result is your current home equity.

The Surprising Truth

You might be surprised by how much equity you’ve gained, especially if you’ve lived in your home for several years. Many homeowners have seen a significant increase in equity due to the rise in home prices across many regions, and with mortgage rates fluctuating, many have also been able to pay off their loans faster, accelerating their equity gains.

If you haven’t yet calculated your home equity, now might be the time to do so. The results could open up new financial opportunities for you.

Bottom Line: Home equity is an asset that can grow over time, but how much you’ve gained depends on a variety of factors, from home price appreciation to mortgage payments and home improvements. If you’re sitting on a significant amount of equity, there are plenty of ways to put it to good use, whether through refinancing, taking out a loan, or even selling your home for a profit. Whatever your next move is, understanding your home equity can help you make smarter financial decisions.

Ready to explore your home equity options? Reach out to us to see how you can leverage your home’s value for your next big financial step.