Home Equity Calculator

1. Enter your current home value (a recent appraisal or realistic market estimate).
2. Enter your mortgage balance, including any second loans secured on the home.
3. Set the maximum loan-to-value your lender allows, often 80 to 85 percent.
4. Read your equity, your loan-to-value ratio and the amount you may be able to borrow.

Here is what each result means:

Home equity is the part of your property that you truly own, rather than the bank. It equals the current market value of the home minus the total you still owe on mortgages secured against it, and it grows as you pay down the loan or as the property rises in value.

Equity matters because you can borrow against it, through a home equity loan or line of credit, and because it is the cash you keep when you sell. This tool estimates equity and borrowing room, but the amount a lender will actually release depends on their appraisal, your income and their own limits.

It subtracts your mortgage balance from your home value to get equity, expresses the balance as a loan-to-value ratio, then applies your lender maximum LTV to estimate how much you could still borrow.

1. Subtract the balance from the value to get equity.
2. Divide the balance by the value for the loan-to-value ratio.
3. Multiply the value by your max LTV and subtract the balance for the borrowing estimate.

Suppose your home is worth 400,000 and you owe 250,000, with a lender max LTV of 80%.

Calculation: equity = 400,000 - 250,000 = 150,000. Loan-to-value = 250,000 / 400,000 = 62.5%. Available = 400,000 x 80% - 250,000 = 70,000.

If the home value rose to 450,000, equity would climb to 200,000 and the amount available at 80 percent would rise to 110,000, showing how sensitive borrowing room is to the valuation.

Loan-to-value is the single number lenders watch most closely. It is your balance divided by the home value, and a lower LTV means more equity and less risk.

To see how paying down the balance lowers your LTV over time, use the mortgage calculator.

Equity moves with both sides of the equation, so watch value and balance together.

Home Value

Rising local prices lift equity even if you pay nothing extra, while a falling market erodes it. Values are estimates until an appraisal.

Mortgage Balance

Every payment reduces the balance and builds equity, and extra payments accelerate it.

Additional Loans

A second mortgage or a line of credit adds to what you owe and reduces usable equity, so include all secured debt.

There are three common ways to tap equity, each suited to a different need.

If you are weighing a refinance, compare the numbers with the mortgage refinance calculator.

Planning to Borrow

Check whether you have enough equity for a home equity loan or line of credit before you apply.

Deciding to Sell

Estimate the cash you would walk away with after clearing the mortgage.

Tracking Your Net Worth

Equity is often a household largest asset. Fold the figure into a wider budget with the cash flow calculator.

1. Overstating the Home Value

An optimistic value inflates your equity. Lenders use a professional appraisal, which can come in lower.

2. Forgetting Second Loans

A HELOC or second mortgage counts toward your balance. Leaving it out overstates usable equity.

3. Assuming You Can Borrow All Your Equity

Lenders cap borrowing at a combined LTV, so some equity always stays locked in.

4. Ignoring Closing Costs

Fees and closing costs reduce the cash you actually receive from any equity product.

5. Treating a Rising Value as Guaranteed

Markets fall as well as rise, and a lower value can wipe out recent equity gains.

The math is exact for the figures you enter, but real borrowing depends on a lender assessment.

Equity grows two ways: by paying down what you owe and by the home rising in value. You control the first directly and can influence the second.

Pay Down the Principal

Extra payments go straight to the balance and compound over time, since every pound of principal cleared early also saves the interest it would have cost. Switching to biweekly payments, rounding payments up, or putting windfalls toward the mortgage all accelerate equity.

Choose a Shorter Term

A 15-year mortgage builds equity far faster than a 30-year one because a larger share of each payment goes to principal from the start, though the monthly cost is higher.

Improve the Property

Well-chosen renovations, particularly kitchens, bathrooms and adding usable space, can lift the appraised value, though not every improvement returns its cost, so weigh the spend against the likely valuation gain.

The two most common ways to borrow against equity suit different needs, and the difference is worth understanding before you choose.

A home equity loan hands you a lump sum up front at a fixed interest rate, repaid in equal instalments over a set term. It is predictable and well suited to a one-off cost you can size in advance, such as a major renovation or consolidating a known debt. A home equity line of credit, or HELOC, instead gives you a revolving credit limit you can draw from as needed during a draw period, usually at a variable rate, paying interest only on what you use. It suits ongoing or uncertain costs, like a phased project or a financial cushion, but the variable rate makes future payments less predictable.

Both are secured against your home, so both put the property at risk if you cannot repay. The choice usually comes down to whether you need a fixed sum now or flexible access over time.

A cash-out refinance is a third route to your equity. Instead of adding a second loan, you replace your existing mortgage with a new, larger one and take the difference in cash.

Its appeal is a single loan at one interest rate, which can be attractive if current rates are lower than your existing mortgage. The catch is that you reset the clock on your whole mortgage and pay closing costs on the full balance, not just the cash you take out. When rates have risen since you bought, refinancing your entire mortgage to access equity can mean giving up a low rate on the whole balance, which is often a poor trade. In that situation a home equity loan or HELOC, which leaves your first mortgage untouched, is usually cheaper.

Run the total-cost comparison before deciding, since the headline of one simple loan can hide a higher lifetime cost.

When you borrow against equity, lenders look at your combined loan-to-value, or CLTV, which adds every loan secured on the home together and divides by the value. If your first mortgage is at 60 percent LTV and a lender allows an 85 percent CLTV, you can borrow up to another 25 percent of the value.

Lenders cap CLTV, commonly around 80 to 85 percent and occasionally higher, precisely because equity is their safety margin. If prices fall, that buffer absorbs the drop before the loan is underwater, protecting the lender and, indirectly, you. This is why you can never borrow 100 percent of your equity: some is always reserved as that cushion. The exact cap depends on the lender, your credit and the type of property.

The interest rate is only part of the cost. Equity products carry fees that reduce the cash you actually receive and raise the true cost of borrowing.

Expect some combination of an appraisal fee to value the home, origination or application fees, title and legal costs, and sometimes annual fees on a HELOC. On a cash-out refinance, closing costs apply to the entire new mortgage, which can run into thousands. Some lenders advertise no-cost products, but the cost is usually recovered through a higher interest rate. Always ask for the total cost over the life of the loan, not just the monthly payment or the rate, and weigh it against the reason you are borrowing.

Equity can fall as well as rise. If house prices drop enough, your mortgage balance can exceed the home value, leaving you in negative equity, sometimes called being underwater.

Negative equity is mainly a problem if you need to sell or refinance, because selling would not clear the mortgage and refinancing usually requires positive equity. If you can keep making payments and stay put, it often resolves as prices recover and the balance falls. It is riskiest for those who bought with a very small deposit, borrowed heavily against equity near the top of a market, or must move for reasons outside their control. Keeping a healthy equity buffer, rather than borrowing to the maximum the lender allows, is the simplest protection.

Older homeowners have an additional option, known as equity release or, in some markets, a reverse mortgage. It lets those typically over a set age, often 55 or 62, access equity without monthly repayments, with the loan and its rolled-up interest repaid when the home is eventually sold, usually on moving into care or on death.

It can provide income or a lump sum in retirement from a home you do not want to sell, but it is a significant decision. Interest compounds over years and can consume a large share of the property value, reducing what passes to heirs, and it can affect entitlement to means-tested benefits. Independent, specialist advice is strongly recommended before taking this path, as it is difficult to unwind.

Seeing the numbers in a few situations makes the idea concrete. Each assumes an 80 percent maximum loan-to-value.

A Recent Buyer

You bought for 300,000 with a 10 percent deposit, so you owe 270,000 and have 30,000 in equity, a 90 percent LTV. There is nothing available to borrow yet, because you are already above the 80 percent cap. Equity here grows mainly through paying down the loan.

A Long-time Owner

After years of payments and price growth, your home is worth 500,000 and you owe 200,000. That is 300,000 of equity at a 40 percent LTV, with up to 200,000 available under an 80 percent cap. This owner has wide options.

A Falling Market

You owe 280,000 on a home that has slipped to 270,000. Equity is negative 10,000, an LTV above 100 percent, and nothing is available to borrow. Sitting tight and paying down usually restores equity as the market recovers.

For many households, home equity is the single largest component of net worth, often dwarfing savings and investments. That makes it central to long-term financial planning, but also a reason for caution.

Equity is relatively illiquid: unlocking it means either selling, which has costs and upheaval, or borrowing, which adds debt and risk. It is also concentrated in a single asset whose value you cannot control, unlike a diversified portfolio. Treating equity as part of your overall picture, rather than as a spending pot, keeps the decision to tap it deliberate. Many advisers suggest leaving a solid equity cushion untouched as a safety margin, both against a market fall and as security for later life.

Because the loan is secured on your home, borrowing against equity deserves more scrutiny than unsecured credit. A few honest questions prevent expensive mistakes.

First, is the purpose worth putting your home at risk? Funding an appreciating asset or an essential need is very different from funding a depreciating one or day-to-day spending. Second, can you comfortably afford the repayments if rates rise or your income dips? Third, what is the total cost, including fees and interest over the full term, not just the monthly figure? Fourth, is there a cheaper or lower-risk alternative, such as saving longer or an unsecured loan for a small sum? Finally, how much equity will you have left, and is that a safe enough buffer? If the answers are not clearly positive, it is usually worth pausing.

Subtract your total mortgage balance from your home current market value. For example, a home worth 400,000 with a 250,000 balance has 150,000 in equity. Include any second mortgage or line of credit in the balance.

Most lenders cap combined borrowing at about 80 to 85 percent of the home value. Multiply the value by that limit and subtract your current balance to estimate the amount available, though the lender own checks apply.

Below 80 percent is generally strong, leaving more than 20 percent equity and better access to borrowing at lower rates. Above 90 percent limits your options, and above 100 percent means negative equity.

A home equity loan gives a lump sum at a fixed rate, suited to a known cost. A HELOC is a revolving credit line you draw from as needed, suited to ongoing or uncertain expenses.

Yes. Equity is based on the current market value, so if your home has risen in price, that gain is part of your equity even though you have not sold. A lower value would reduce it.

Yes. If your mortgage balance is larger than the home value, you have negative equity, sometimes called being underwater. It can happen when prices fall or after borrowing heavily against the home.

Usually yes. Lenders order a professional appraisal to set the value they will lend against, and it can differ from your own estimate, which changes the equity and borrowing room.

It can lower your interest rate, but it secures previously unsecured debt against your home, so missed payments risk the property. Weigh the total cost and the risk carefully before deciding.

CLTV adds up every loan secured on your home, including a second mortgage or HELOC, and divides by the home value. Lenders cap CLTV, often around 80 to 85 percent, which is why you can never borrow all of your equity.

Pay down the principal with extra or biweekly payments, choose a shorter mortgage term so more of each payment clears principal, and make well-chosen improvements that raise the appraised value. Rising local prices also build equity passively.

A home equity loan is a second loan on top of your existing mortgage, leaving the first untouched. A cash-out refinance replaces your whole mortgage with a larger one, which can be costly if it means giving up a low existing rate.

No. The calculation runs entirely in your browser and nothing you enter is stored or sent anywhere unless you choose to Save a result, which stays only in this browser.

• Home equity and how it works (Corporate Finance Institute).
• Loan-to-value ratio explained (Corporate Finance Institute).
• Home ownership and mortgages (US SEC Investor.gov).