Project your home equity growth over time. Calculate net profit on sale after accounting for appreciation, mortgage paydown, and selling costs.
Input the home purchase price, down payment, loan rate, and how many years you plan to hold the property.
Add the expected annual appreciation rate and estimated selling costs as a percentage.
View your projected equity, home value, mortgage paydown, and net profit after selling costs over your hold period.
US home values have historically appreciated at 3-4% annually on average, though this varies enormously by location and time period. Some markets averaged 8-10% during 2020-2022; others have seen declines. Use local market data for your projection.
Typical selling costs include: real estate agent commissions (5-6% of sale price), closing costs (1-2%), and any repairs or staging. Total selling costs of 7-9% are common. On a $500K home, you might spend $35,000 to $45,000 in selling costs.
Home equity = Current home value - Remaining mortgage balance. It grows through two mechanisms: principal paydown (mortgage payments reducing your balance) and appreciation (the home increasing in value). Both grow over time, accelerating equity in later years.
Gross profit = Sale price - Original purchase price. Net profit = Sale price - Purchase price - Selling costs - Remaining mortgage balance - Original down payment (capital recovered). Net profit reflects actual cash-in-hand after all costs and paying off the mortgage.
Real estate returns generally improve with longer holding periods due to compounding appreciation and mortgage paydown. Short holds of 1-3 years often lose money after transaction costs. Most advisors recommend holding for at least 5-7 years to overcome purchase and selling costs.
Primary residences qualify for capital gains exclusion: $250,000 per person ($500,000 for married couples) if you have lived in the home for 2 of the last 5 years. Gains above this threshold are taxed at long-term capital gains rates (0%, 15%, or 20%).
Price appreciation is the increase in home value. Total return includes appreciation plus equity built through mortgage paydown plus any rental income (if applicable), minus all costs of ownership (taxes, insurance, maintenance, transaction costs).
Historically yes. Home values tend to rise with inflation over the long term, and a fixed-rate mortgage locks in your largest housing cost while everything else inflates. This makes homeownership a natural inflation hedge compared to renting where costs rise with inflation.
