Home Equity Calculator
Calculate your home equity by comparing your home's value to your mortgage balance.
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About the Home Equity Calculator
Home equity is your home's current market value minus what you still owe on the mortgage. It's the cash you would walk away with after a sale (minus selling costs). Equity grows three ways: appreciation, principal paydown, and improvements that add value. Understanding it matters for refinancing, HELOCs, and knowing your real net worth.
The Formula
Equity = Current market value − Total mortgage balances. Loan-to-value (LTV) = Mortgage balance ÷ Market value. Most lenders cap a HELOC at 80-85% combined LTV, so available equity = (Market value × 0.85) − Mortgage balance.
Worked Example
Home bought for $400,000 with 20% down, now worth $480,000 after 5 years. Mortgage balance $290,000 (you've paid off about $30,000 of principal). Equity = $480,000 − $290,000 = $190,000. Available for HELOC at 85% LTV: $480,000 × 0.85 = $408,000 limit, minus $290,000 existing mortgage = $118,000 line of credit available.
Three ways equity grows
Principal paydown: slow in years 1-10 of a mortgage, accelerating later. Market appreciation: averages 3-4% nominally in the long run, much higher in some markets and decades. Improvements: kitchens and bathrooms recoup 50-80% of cost in value, additions and pools much less. Cosmetic improvements (paint, landscaping) often recoup 100%+.
HELOC vs home equity loan vs cash-out refinance
A HELOC is a revolving credit line, variable rate, draw period 5-10 years. Best for ongoing renovation or as backup liquidity. A home equity loan is a fixed lump sum at a fixed rate, fully amortized — best for one-time large expenses. A cash-out refi replaces your whole mortgage with a larger one — best when rates have dropped below your current mortgage rate.
Using equity wisely (and unwisely)
Good uses: home improvements that add value, consolidating high-interest debt, education, emergency funds. Risky uses: vacations, cars (depreciating asset funded with home), speculative investments. Equity-financed debt converts unsecured borrowing into debt secured by your house — a missed payment can lead to foreclosure.
Common Mistakes
- Treating home equity as easily-spendable cash. It costs money to access (closing costs, fees, interest).
- Maxing out a HELOC for non-investment purposes during a bull housing market, then being underwater when prices correct.
- Forgetting selling costs (6%+) when estimating walk-away equity.
Frequently Asked Questions
How do I find my home's current value?
Free estimates from Zillow/Redfin are starting points but inaccurate by 5-15%. A licensed appraisal ($400-700) is authoritative. A real estate agent's CMA is free and quite accurate.
Can I deduct HELOC interest?
Only if the proceeds are used to buy, build, or substantially improve the home securing the loan, and total mortgage debt is under $750,000 (post-TCJA limits).
This calculator is for informational purposes only and does not constitute financial, tax, or legal advice. Consult a licensed professional before making significant financial decisions.