Unexpectedly Intriguing!
August 14, 2006

People tap the equity they've built up in their homes for a variety of reasons. While the two most popular reasons are to pay for home improvements or to consolidate debt, Bankrate notes several other options for which people put equity to use:

Sometimes, the easiest way to pay tuition and fees for the kids' private school, or for college or technical school, is to turn to home equity. This is especially true for families whose incomes are too high to qualify for grants or student loans. There are also student loans for this purpose.

An equity loan can be a godsend if you are hit with thousands of dollars in medical bills or you lose your job. Tax advantages and lower interest rates also make equity loans an option when financing a car, motorcycle or some other high-priced purchase. Many a homeowner even uses equity in the primary home to make a down payment (or the entire purchase price) on a vacation home.

Regardless of their reasons, people considering home equity loans have a basic question they need to answer: how much equity do they have? That's where Political Calculations' latest tool comes into play. We've worked out the back-of-the-envelope math to estimate how much equity you may have available to you, and put it together in the tool below!:

House Valuation Data
Input Data Values
House Purchase Price
Estimated Current Value of House
Mortgage Data
Mortage Amount
Interest Rate (%)
Term of Mortgage (Years)
Frequency of Payments
Home Equity Loan Data
Amount Currently Borrowed Against Equity

Home Equity Component Estimates
Calculated Results Values
Original Equity in Home (Down Payment)
Valuation Driven Change in Home Equity
Equity Accumulated Through Mortgage Payments
Home Equity and Payoff Estimates
Total Equity in Home (Original + Accumulated + Valuation - Borrowed)
Mortgage and Home Equity Loan Payoff Amount

The only information that a homeowner wouldn't necessarily already have is a current estimate of the value of their house. There are several different tools available that might be used to calculate the value of your home online, including:

If you live in an area that has seen rapid price appreciation, you might want to take a conservative approach and multiply your current home value estimate by 75% if it's substantially above your home's purchase price. Lending institutions will often work with such a reduced home value appraisal amount to limit their exposure to housing market volatility, particularly where their customers are seeking to refinance an existing loan.

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