Using an Equity Shift Calculator to Help Sellers Overcome Rate Anxiety

This calculator helps equity-heavy homeowners understand how leveraging their net equity can offset the impact of higher mortgage rates. By demonstrating how their equity can reduce the loan balance on their next home, you can empower sellers to move forward confidently, even in this challenging market.

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Step-by-Step Guide to Build an Equity Shift Calculator in Excel

1. Gather Key Seller Inputs

Start by creating input fields for the seller’s current and future home details:

• Current Mortgage Balance (e.g., $200,000)

• Current Monthly Payment (Principal & Interest Only) (e.g., $2,280.52)

• Estimated Current Home Value (e.g., $700,000)

• New Home Value (e.g., $900,000)

• New Interest Rate (e.g., 6.5%)

• Loan Term (Years) (e.g., 30 years)

Allow the seller to input these values into Excel.

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2. Calculate Net Equity

To determine how much equity the seller can apply as a down payment:

• Formula: Net Equity = Current Home Value – Current Mortgage Balance

• In Excel: Subtract the mortgage balance from the home value.

This value will act as the down payment for their next home.

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3. Determine the New Mortgage Balance

Subtract the net equity (down payment) from the new home value:

• Formula: New Mortgage Balance = New Home Value – Net Equity

• In Excel: Subtract net equity from the new home value.

This gives the loan amount for the new property.

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4. Calculate the New Monthly Mortgage Payment

Use the Excel PMT function to calculate the monthly payment for the new loan. The formula is:

=PMT(rate, nper, pv)

Where:

• rate = Monthly interest rate (New Interest Rate ÷ 12 ÷ 100)

• nper = Total number of payments (Loan Term × 12)

• pv = Loan principal (New Mortgage Balance)

Input this formula to calculate the new monthly payment for Principal & Interest.

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5. Compare the Current and New Monthly Payments

Subtract the seller’s current monthly payment from the new monthly payment:

• Formula: Payment Difference = New Monthly Payment – Current Monthly Payment

• In Excel: Subtract the old payment from the new payment.

This shows how the equity shift impacts their payment—whether it’s higher, lower, or roughly the same.

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The Benefit

This tool reframes the conversation around high interest rates by focusing on the seller’s equity. For homeowners with substantial equity, the tool demonstrates how they can:

• Offset higher interest rates by reducing the loan balance on their next property.

• Understand the true financial impact of making a move.

• Make informed decisions with clear, data-driven insights.

By walking sellers through these numbers, you’ll help alleviate their apprehension and position yourself as a trusted advisor.