Many homeowners thinking about selling will ask “Do I have sufficient equity to sell my home?” It’s a question that needs a few pieces of information to properly answer. For the calculation, you’ll need the current market value of your property and the amount remaining on your mortgage(s).
Current Market Value of Property is Important
If you are interested in calculating the amount of equity in your property, you’ll need to know the current market value of your property. If you’ve looked online to some real estate websites, know that these might not be the most accurate. Here’s why – in general, these sites know nothing about property enhancements and interior condition of the residence. The estimate may also overlook unique amenities or features of your home coupled with recent market condition fluctuations. If you’re interested in an accurate equity estimate – I’d encourage you to work with a realtor to obtain a comparative market analysis.
Mortgaged Values Are Part of the Equation
The other part of the equation you need to have handy are the outstanding values of your property (if mortgaged). This would include outstanding first and second mortgages. Here you would be thinking about home equity lines of credit and home equity loans as well.
Equity = Current Market Value – Amount Outstanding
The equation to determine equity position is easy enough to follow. Equity = current market value – amount outstanding.
When Does Equity Matter?
In general, I find there are 2 times when equity matters the most: when someone is looking to sell their property and when trying to drop their PMI. Equity always matters if you want to see the direction your investment has taken. However, it will not be realized until you sell the home.
Do I Have Sufficient Equity to Sell My Home?
So you may wonder, why does the amount of equity matter when trying to sell your home? In general, you’ll want the sale price of your home to be greater than the amount outstanding. Hopefully there is even more than that (which can serve as your investment in a new property or nest egg if downsizing). A few other thoughts to caution on when talking about equity: ensure your mortgage has no pre-payment penalties and be aware of closing costs on the home (as you will likely have your share of costs to cover).
Available equity is a simple enough concept to understand as long as you have good metrics to complete the measurement. If you have questions or would like a comparative market analysis on your property, please feel free to connect.