Home Equity Calculator

What is Home Equity?

Equity = Home Value - Outstanding Mortgages - Other Liens

Home equity represents your ownership stake in your property. It grows through mortgage payments (principal reduction), home appreciation, and home improvements.

How Equity Builds

• Mortgage Payments: Each payment reduces principal
• Appreciation: Rising home values increase equity
• Improvements: Renovations can add value
• Extra Payments: Paying down principal faster

Loan-to-Value (LTV) Ratio

LTV = Total Debt / Home Value

• 80% or below: Best rates, no PMI, HELOC eligible
• 80-90%: May qualify for HELOC, some restrictions
• Above 90%: Limited borrowing options, PMI likely

Ways to Access Equity

• HELOC: Line of credit, draw as needed, variable rate
• Home Equity Loan: Lump sum, fixed rate, second mortgage
• Cash-Out Refinance: New larger mortgage, single payment
• Sell: Access all equity at once

Uses for Home Equity

• Home improvements (may be tax-deductible)
• Debt consolidation (lower rate than credit cards)
• Emergency fund backup
• Investment property down payment
• Education expenses

Risks of Tapping Equity

• Your home is collateral - default risks foreclosure
• Market downturns can leave you underwater
• Adds to monthly expenses
• Reduces wealth-building potential

Tips for Building Equity Faster

• Make extra principal payments
• Choose a shorter loan term
• Avoid cash-out refinancing
• Make strategic improvements
• Maintain your property well