Whether you are selling your home or plan to apply for a second mortgage to finance the purchase of another home, you must know the amount of equity you have available in your present home. Typically, lenders require that you place a minimum of 20 percent of a home's sale price as a down payment for its purchase. However, some lenders will finance a house for a smaller down payment depending on your credit score.
Contact your lender to determine your mortgage's payoff amount. Your most recent mortgage statement might also provide this information.
Call your real estate agent or lender and ask for an appraisal of your home. If you have a purchase offer on your home, you can use the sale price on the offer.
Subtract your payoff amount from the sale price or appraised value of your home. For example, if the value of your home is $150,000, and your payoff amount is $50,000, your equity is $100,000.
Tips
MSN Money provides a home equity calculator that will help you calculate the amount of equity a bank might allow you to borrow.
Warnings
The interest on a home equity loan can be higher than the interest on a traditional mortgage. If you owe more on your home than you can sell it for, you have negative equity and cannot use your current home to purchase another house.
References
- Federal Citizen Information Center: How to Buy a Home With a Low Down Payment
- County of Los Angeles Department of Consumer Affairs: Home Equity Credit Line
- Internal Revenue Service. "Home Mortgage Interest Deduction 2016." Page 2. Accessed Aug. 29, 2020.
- Internal Revenue Service. "Publication 5307." Page 5. Accessed Aug. 29, 2020.
- Internal Revenue Service. "Publication 936: Home Mortgage Interest Deduction." Accessed May 12, 2020.
- Internal Revenue Service. "Interest on Home Equity Loans Often Still Deductible Under New Law." Accessed Aug. 29, 2020.
Tips
- MSN Money provides a home equity calculator that will help you calculate the amount of equity a bank might allow you to borrow.
Warnings
- The interest on a home equity loan can be higher than the interest on a traditional mortgage.
- If you owe more on your home than you can sell it for, you have negative equity and cannot use your current home to purchase another house.
Writer Bio
Specializing in business and finance, Lee Nichols began writing in 2002. Nichols holds a Bachelor of Arts in Web and Graphic Design and a Bachelor of Science in Business Administration from the University of Mississippi.