How to Calculate Equity in Your Home to Purchase Another House

by Lee Nichols

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.

Step 1

Contact your lender to determine your mortgage's payoff amount. Your most recent mortgage statement might also provide this information.

Step 2

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.

Step 3

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.