For homeowners, one of the most important financial numbers isn't always the home's market value.
It's the equity.
Home Equity = Home Value − Mortgage Balance
If your home has appreciated while your mortgage balance has declined, you may have built meaningful equity.
Why Equity Matters
Equity can potentially help homeowners:
- Move to another home
- Fund a down payment
- Reduce debt
- Invest in another property
- Improve financial flexibility
But equity isn't the same as cash.
Selling costs, transaction expenses, and the remaining mortgage balance all matter.
Before making a financial decision based on equity, homeowners should obtain a realistic estimate of current market value and understand the costs involved.
Your home may be one of your largest financial assets.
Understanding it is important.