Home Equity Calculator

What Is Home Equity?

Home equity is the portion of your property that you truly "own" — the difference between your home's current market value and the total outstanding balance on all loans secured by the property. It represents your ownership stake and is one of the most significant components of personal net worth for most homeowners.

For example, if your home is worth $400,000 and you owe $250,000 on your mortgage, your home equity is $150,000, or 37.5% of the home's value.

Understanding LTV and CLTV Ratios

The Loan-to-Value (LTV) ratio measures how much of your home's value is financed by your primary mortgage. The Combined Loan-to-Value (CLTV) ratio includes all loans against the property — primary mortgage, HELOCs, and second mortgages.

Lenders use these ratios to assess risk. Lower LTV ratios generally qualify you for better interest rates and more borrowing options. Key LTV thresholds include:

• 80% LTV or lower — Eligible for PMI removal, best mortgage rates
• 85% LTV or lower — May qualify for HELOC or home equity loan
• 90% LTV or lower — Standard conventional loan qualification
• 97% LTV — Maximum for some first-time buyer programs

How to Build Home Equity Faster

• Make extra principal payments — Even small additional amounts accelerate equity building significantly over time
• Switch to biweekly payments — Making half your monthly payment every two weeks equals 13 full payments per year instead of 12
• Refinance to a shorter term — A 15-year mortgage builds equity much faster than a 30-year mortgage, though with higher monthly payments
• Make strategic home improvements — Kitchen and bathroom remodels, energy efficiency upgrades, and curb appeal improvements can increase home value
• Avoid cash-out refinancing — While sometimes necessary, pulling equity out resets your progress
• Wait for appreciation — In most markets, home values increase 3-5% annually, building equity passively

Ways to Access Your Home Equity

• Home Equity Line of Credit (HELOC) — A revolving line of credit with variable rates, ideal for ongoing expenses. Typically requires 15-20% equity remaining.
• Home Equity Loan — A lump-sum loan with fixed rates, good for one-time large expenses. Usually requires at least 20% equity after the loan.
• Cash-Out Refinance — Replace your existing mortgage with a larger one and pocket the difference. Best when rates are lower than your current mortgage.
• Reverse Mortgage — For homeowners 62+, converts equity into income. You retain ownership but the loan balance grows over time.

Frequently Asked Questions