Your home is probably your most substantial asset, meaning that your equity in it makes up a big chunk of your family's net worth. Equity is that portion of your home's total value that isn't encumbered by a loan or lien. A comfortable margin of equity makes it easier to get some types of consumer credit and can make you eligible for equity borrowing. You can keep track of your home's total value informally via home valuation websites like Zillow.com or a free market analysis by a real estate agent. If you plan to seek a second mortgage or equity line of credit, however, you will need a formal appraisal by a licensed appraiser.
Go to zillow.com, or a similar site, and plug your address into the search bar to get an estimate of total value based on local sales. This gives you a general idea of your home value in the context of area values.
Find an appraiser in your area who handles your type of property and hire her to produce a formal appraisal of your home. Call your bank for a referral or use an online locator, such as the one offered by the Appraisal Institute. A formal appraisal establishes the total value of your home and explains the reasons for the evaluation.
Write down the total value of your home on a piece of paper.
Subtract the balance due on your mortgage or mortgages.
Subtract the amounts of any liens, lines of credit, consumer credit or property taxes that are secured by the property. Your home equity is the balance left after subtracting the liabilities -- the mortgage and secured debts -- from the total value of the home.
- If subtracting the mortgage and secured debts from your total value yields a negative number, then your home is "under water." You owe more than you can sell your house for in the current market.
- Home values can vary widely over as few as three months. The value can change up or down by thousands of dollars in a few months, based on actual sale prices of houses in your neighborhood.
Billie Jo Jannen is a politics and lifestyle columnist in rural San Diego County and a senior copy editor for Demand Media. Her writing and editing career spans 23 years, and she specializes in border and environmental affairs. Jannen's eclectic education includes engineering and horticulture, and she represents the Rural Economic Action League in regional economic development planning.