Find out how much equity you have in your home, your loan-to-value ratio, and how much you may be able to borrow against it.
What Is Home Equity?
Home equity is the portion of your home you actually own — the current market value minus everything you owe against it. It grows two ways: as you pay down your mortgage principal and as your home appreciates in value. Equity is often a household's largest source of net worth.
How Equity Is Calculated
Equity = current home value − mortgage balance. If your home is worth $450,000 and you owe $250,000, you have $200,000 in equity, or about 44% of the home's value. Your loan-to-value ratio is the mirror image: the balance owed divided by the value.
How Much You Can Borrow Against It
Lenders rarely let you borrow against all your equity. They cap total mortgage debt at a maximum loan-to-value, often 80% to 85%. The amount you can borrow equals that limit applied to your home's value, minus your existing mortgage balance.
Tip: Keep a cushion. Borrowing right up to the lender's limit leaves you exposed if home prices fall. Many advisors suggest keeping at least 20% equity untouched as a safety margin.
Frequently Asked Questions
How do I calculate my home equity?
Subtract your remaining mortgage balance from your home's current market value. If the home is worth $400,000 and you owe $240,000, your equity is $160,000.
What is a good amount of home equity?
More is generally better. Reaching 20% equity lets you drop private mortgage insurance, and keeping at least 20% provides a cushion if home values decline. Many owners build equity steadily through regular payments and appreciation.
What is loan-to-value ratio?
Loan-to-value (LTV) is your mortgage balance divided by your home's value, expressed as a percentage. A $240,000 balance on a $400,000 home is a 60% LTV. Lenders use LTV to decide how much more you can borrow.
How much equity can I borrow?
Lenders typically allow combined loan balances up to 80% to 85% of your home's value. Subtract your current mortgage from that limit to estimate how much you can access through a home equity loan or line of credit.
Does home equity count toward net worth?
Yes. Home equity is an asset and is included in your net worth. It is less liquid than cash or investments, since accessing it requires selling, refinancing, or taking out a home equity loan.