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If you’re a homeowner, understanding your home equity is crucial—whether you’re planning to sell, refinance, or tap into your property’s value for a loan. A home equity calculator provides a quick, clear estimate of how much of your home you truly own and how much you may be able to borrow for major expenses or investments.
What Is Home Equity?
Home equity is the portion of your property’s value that you actually own, calculated as the difference between your home’s current market value and the total balance of all loans secured by your home. As you pay down your mortgage and as your home’s value appreciates, your equity grows.
Formula:
Home Equity=Current Home Value−Total Mortgage Balance
How Does a Home Equity Calculator Work?
A home equity calculator helps you estimate your equity in three simple steps:
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Estimate Your Home’s Current Value:
Use online valuation tools (like Zillow, Redfin, or Realtor.com) or get a professional appraisal for the most accurate figure.
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Find Your Mortgage Balance:
Check your latest mortgage statement or your lender’s online portal for your current balance. Include all loans secured by your home, such as a home equity loan or line of credit (HELOC). -
Calculate Your Equity:
Subtract your total mortgage balance from your home’s current value.
For example, if your home is worth $400,000 and you owe $120,000 on your mortgage, your home equity is $280,000.
Why Is Home Equity Important?
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Wealth Building:
Home equity is a key component of your net worth. As you pay down your mortgage and your property appreciates, you build wealth. -
Borrowing Power:
Lenders allow you to borrow against your equity with a home equity loan or HELOC, typically up to 80–85% of your home’s value minus your outstanding mortgage. -
Financial Flexibility:
You can use home equity for renovations, debt consolidation, education, or other major expenses.
How Much Home Equity Can You Access?
Not all your equity is “usable.” Most lenders require you to leave a cushion—often 15–20% of your home’s value untouched.
Usable Equity Formula:
Usable Equity=(Home Value×0.80)−Loan Balance
For example, if your home is valued at $500,000 and your mortgage balance is $200,000:
$500,000×0.80=$400,000
$400,000−$200,000=$200,000 usable equity
Tips to Increase Your Home Equity
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Make Extra Mortgage Payments:
Paying more than the minimum reduces your principal faster, boosting equity. -
Renovate Strategically:
Home improvements can increase your property value, growing your equity. -
Benefit from Market Appreciation:
As local property values rise, so does your equity—even if your mortgage balance stays the same.
Home Equity Loans vs. HELOCs
| Feature | Home Equity Loan | HELOC |
|---|---|---|
| Type | Lump sum, fixed rate | Revolving line, variable rate |
| Repayment | Fixed monthly payments | Flexible withdrawals/payments |
| Best for | One-time expenses | Ongoing or unpredictable expenses |
| Borrowing limit | Up to 85–95% of home value | Up to 89% of home value |
Both use your home as collateral, so it’s important to borrow responsibly.
Home Equity Calculator Example
Suppose your home’s value is $350,000 and your mortgage balance is $120,000:
$350,000−$120,000=$230,000 in home equity
If your lender allows you to borrow up to 80% of your home’s value:
$350,000×0.80=$280,000
$280,000−$120,000=$160,000 usable equity
Conclusion: Take Control with a Home Equity Calculator
A home equity calculator is an essential tool for homeowners who want to understand their financial position, plan for big expenses, or explore borrowing options. By knowing how much equity you have, you can make smarter decisions about refinancing, home improvements, or accessing cash for life’s milestones.
Use our home equity calculator today to unlock your property’s full potential and take the next step in your financial journey
Ready to find out your home equity? Try our home equity calculator now and discover how much you could borrow or invest in your future!
