Home Buying

What Is Home Equity?

Home equity is the portion of a property's value that the owner actually owns: the current market value minus the remaining mortgage balance and any other liens. Equity grows as the loan is paid down and as the property's value rises, and it falls if the value declines.

Formula

Home equity = current home value − outstanding mortgage balance (and other liens).

Example

A home worth 400,000 with a 250,000 mortgage balance has 150,000 in equity, which is 37.5% of the home's value.

Borrowing Against Equity

Home equity loans and home equity lines of credit (HELOCs) let owners borrow against equity. Lenders usually cap the combined loan-to-value ratio, commonly around 80%–85%, so not all equity can be borrowed.

🧮 Calculate It Yourself

Put Home Equity into practice with these free calculators — no sign-up, nothing stored.

🔑 Home Equity Calculator Find your current home equity and estimated borrowing capacity. Calculate → 💎 Net Worth Calculator What you own, minus what you owe — your financial progress number. Calculate → 🏠 Mortgage Calculator Estimate your monthly mortgage payment including taxes, insurance, and PMI. Calculate →

🔗 Related Terms

More Home Buying Terms

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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.