Home Equity
The portion of your home's value that you actually own (market value minus mortgage balance)
What You Need to Know
Home equity is calculated by subtracting your mortgage balance from your home's current market value. It represents the portion of your home that you truly own. Home equity can be accessed through home equity loans, HELOCs, or by selling the home. It's often a person's largest asset.
Calculation: Home Equity = Home Market Value
- Mortgage Balance
Building Home Equity:
- Making mortgage payments (principal portion)
- Home value appreciation
- Making extra principal payments
- Home improvements that increase value
Accessing Home Equity:
- Home Equity Loan: Lump sum loan against equity
- HELOC: Line of credit against equity
- Cash-out Refinance: New mortgage for more than current balance
- Selling: Convert equity to cash
Example: $400,000 home value - $250,000 mortgage = $150,000 home equity
Sources & References
This information is sourced from authoritative government and academic institutions:
- consumerfinance.gov
https://www.consumerfinance.gov/ask-cfpb/what-is-home-equity-en-106/
Related Calculators & Tools
Put your knowledge into action with these interactive tools:
HELOC Calculator
Calculate HELOC draw limits, interest-only payments, and repayment scenarios to understand your home equity borrowing power.
Cash-Out Refinance Calculator
Calculate how much cash you can take out when refinancing. Compare cash-out refi vs HELOC. Free cash-out calculator.
Related Terms in Real Estate
Closing Costs
Fees to finalize home purchase—2-5% of home price. Includes appraisal, title insurance, attorney, origination, taxes. Plan $10K on $300K home.
Earnest Money
Good faith deposit (1-3% of home price) when making offer. Shows seller you're serious. Returned if deal falls through, applied to closing if successful.