How exactly is home equity calculated ?

June 25th, 2006 by Questions

I read on this blog some time ago that the selling costs and legal fees are subtracted from my home equity. That makes sense to me as the home will eventually be sold, sooner or later. If the creditors take it over, they will also have to sell it.
But recently I\’ve spoken to two trustees in Edmonton about it and both gave me unclear answers suggesting that it is subject to negotiations with creditors and I will be lucky if half of the selling costs will be considered when calculating my home equity.
It is important because it means many thousands of $ that I will have to pay over the home equity or I loose the house. Selling costs start from around $10,000 and up.
So how exactly is home equity calculated ?


One Response to “How exactly is home equity calculated ?”

, A licensed trustee said:

The only 100% certain way to know what the selling costs on a home will be is to sell the home. Anything else that you may be allowed is at the discretion of your creditors and practices vary by region.

In Ontario, where I practice, there is no exemption for home equity. When we discuss home equity here we take into account real estate fees, legal costs, mortgage penalties, etc. In Alberta where you appear to live there is a $40,000 exemption for equity – I don’t find it surprising that they would be less inclined to accept all of the deductions we allow.

The rationale is simple – why should you be able to deduct expenses you aren’t actually incurring? (That is, if you aren’t actually selling the house you aren’t really paying any of these costs).

Due to regional practices I can’t give you a “best answer” – if tow different trustee have told you the same basic thing then that’s likely the local standard that you need to deal with.

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