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October 26th, 2012

When will your home equity return?



House on Calc for tri refiWhile many American homeowners continue to ask themselves that question every day, others stopped worrying and walked away from homes they declared financially unsalvageable.

But if you’re among the majority of homeowners who have stayed in your house because it’s your home (not an investment), you certainly want an accurate idea of when your equity might return and what you can do to speed that process along.

Even if you are eligible for refinancing under HARP 2.0, you could still be underwater for some time to come.

Getting your mortgage back above water depends upon three things:

  1. The continued payment of your mortgage (amortization)
  2. How quickly home prices recover in your area (appreciation), and
  3. Any additional mortgage payments you might make along the way (prepayment)

Whether your question is, “When will my home be back above water,” or “How can I get my home back above water,” we have the tools that can help.

HSH.com has developed the “KnowEquity When” and “KnowEquity How” calculators to let you know when you’ll be back to even.

KnowEquity When

It is the intersection of amortization, appreciation and prepayment that will tell you the exact date of when your equity will return. Stronger home price appreciation or greater prepayments will speed up the time, while regular amortization will take the longest.

Plug in your own scenario–initial loan amount, term and interest rate, first payment date, current value, expected annual appreciation, and any extra monthly payment–to see exactly when you’ll be back in the black.

The calculator’s results will display how many mortgage payments you’ve made so far, your next payment due date, current balance, amount your loan is underwater, and when your loan will reach 0 percent equity. Also, if you want to sell in the future, the calculator displays the date you’ll have enough equity to pay off your mortgage and have enough to pay the typical amount of sales costs.

KnowEquity How

While this calculator will give you a result to fit your desired time frame of when you want your equity to return, you can tweak and tune your inputs to specify a given level of appreciation or the amount of prepayment you can or want to make.

In addition to plugging in the factors noted above for KnowEquity When, you also enter dates for when you’ll begin prepaying, your desired breakeven date, and the desired equity level you wish to reach in your timeframe.

In addition to displaying your current loan details (noted in the above), “KnowEquity How” we’ll display a month and a year in which your home will reach your desired equity position. Also, we’ll tell you what your equity position will be on your desired payoff date.

If you’re underwater, be sure to check out our “KnowEquity When” and KnowEquity How calculators.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

Our bloggers:

Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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