On this page
What's next
Earn a high-yield savings rate with JG Wentworth Debt Relief
How to Calculate Home Equity
by
Marco Maknown
•
July 14, 2026
•
15 min
Your home equity is the portion of your property you actually own—and knowing exactly how much you have is the first step to using it wisely. Whether you’re considering a home equity loan, a cash-out refinance, or simply tracking your net worth, understanding how to calculate home equity gives you the financial clarity to make smarter decisions.*
What home equity actually means
Home equity is the difference between what your home is worth today and what you still owe on it. It’s not a line item on a bank statement—it’s a running calculation that changes every time you make a mortgage payment, your property value shifts, or you borrow against the home.
Think of it this way: if you bought a $400,000 home with a $80,000 down payment and a $320,000 mortgage, you started with $80,000 in equity. Every mortgage payment chips away at that loan balance, and every year the housing market moves, your property value adjusts. Equity is the net result of all of that—your stake in the asset.
Equity also represents collateral. Lenders view home equity as a well-secured form of borrowing because real property backs the loan. That’s why home equity products often carry lower interest rates than unsecured options like personal loans or credit cards, though rates vary by lender, credit profile, and market conditions.
The home equity formula
The math is straightforward. The complexity comes in getting accurate inputs.
Current home value minus mortgage balance
Home Equity = Current Market Value − Outstanding Mortgage Balance(s)
That’s it. Two numbers. But both require some digging to get right.
Worked example with real numbers
Say your home was appraised at $525,000 last month. Your mortgage statement shows a remaining balance of $310,000.
$525,000 − $310,000 = $215,000 in home equity
Your equity stake as a percentage: $215,000 ÷ $525,000 = 40.95%
That percentage matters because lenders care about loan-to-value (LTV) ratios—the flip side of your equity percentage. In this example, your LTV is approximately 59%, which is generally considered a favorable position for many home equity products, though lender requirements vary.
Accounting for HELOC balances and second mortgages
If you have more than one loan secured by your home, all of those balances factor into your equity calculation. Add up every outstanding lien:
Home Equity = Current Market Value − (First Mortgage Balance + HELOC Balance + Second Mortgage Balance)
Using the same example: if you also have a HELOC with a $30,000 outstanding balance, your equity drops to $185,000 ($525,000 − $310,000 − $30,000).
This combined figure is what lenders use when evaluating a new application for home equity borrowing. They’ll look at your combined loan-to-value (CLTV) ratio, not just your first mortgage LTV.
Get a Home Equity Cashout of $50,000 or more
How to find your home’s current market value
The hardest part of the equity equation is pinning down an accurate home value. Property values are not static—they shift with local inventory, interest rates, neighborhood development, and broader economic conditions. According to the Federal Reserve’s data, U.S. home prices have historically appreciated roughly 4% annually over the long run, though regional variation is significant. Here are four ways to find yours.
Professional appraisal
A licensed appraiser physically inspects your home, evaluates its condition, square footage, features, and location, and compares it to recent nearby sales. Among the available methods, a professional appraisal tends to be the most thorough—and it’s the one lenders require for most home equity products. Appraisals typically cost $300–$600 and take a week or two to complete.
If you’re applying for a HELOC or home equity loan, the lender will usually order the appraisal themselves. For planning purposes, you can hire one independently.
Online estimators (Zillow, Redfin, Realtor.com)
Automated Valuation Models (AVMs) offered by platforms like Zillow (Zestimate), Redfin, and Realtor.com use public records, listing data, and algorithms to estimate your home’s value instantly and for free. They’re useful for a ballpark figure but can be off by 5–10% or more, particularly in rural areas or neighborhoods with few comparable sales.
Use these tools as a starting point, not a final answer. Cross-reference at least two or three AVMs and take the average if the numbers diverge.
Comparable sales approach
Also called “comps,” this method looks at recent sales of similar homes in your area—typically within a half-mile and sold within the past three to six months. The more similar the homes are in size, age, condition, and features, the more reliable the comp.
You can pull recent sales data from sites like Zillow or Redfin, or ask a real estate agent to run a comparative market analysis (CMA) for you at no cost. This is the same methodology appraisers use, so it’s a solid DIY proxy.
Broker price opinion
A broker price opinion (BPO) is an estimate prepared by a licensed real estate agent or broker, usually for $50–$200. It’s less formal than a full appraisal but more thorough than an AVM. Some lenders accept BPOs for home equity decisions, particularly on lower-value loans or refinances. If you need something faster and cheaper than an appraisal, a BPO is a reasonable middle ground.
How to find your current mortgage balance
Your mortgage balance is the easier half of the equation—it’s a precise number your lender tracks to the cent. The fastest ways to find it:
- Log into your mortgage servicer’s online portal. Your current payoff balance and principal balance are typically on the dashboard.
- Read your monthly mortgage statement. It lists your remaining principal balance after each payment.
- Request a payoff quote. This is the exact amount you’d need to pay to close out the loan today, including any accrued interest. It’s slightly higher than your statement balance and valid for a specific date.
Note the difference between your principal balance (the amount still owed on the loan) and your payoff balance (principal plus any interest accrued since your last payment). For most equity calculations, the principal balance is a reasonable figure to use. For refinancing, use the payoff quote.
If you’ve made extra payments or have a biweekly payment schedule, your balance may be lower than you expect. Pull a fresh statement before running any equity calculations.
Tappable equity vs. total equity
Total equity and tappable equity are not the same thing. Total equity is what you own on paper. Tappable equity is what you can actually borrow against.
The 80% combined loan-to-value rule
Most lenders cap home equity borrowing at an 80% combined loan-to-value ratio. That means your total outstanding debt secured by the home—your first mortgage plus any new borrowing—cannot exceed 80% of your home’s appraised value.
Maximum Borrowing = (Home Value × 80%) − Existing Mortgage Balance(s)
Using our earlier example ($525,000 home, $310,000 mortgage):
$525,000 × 0.80 = $420,000 $420,000 − $310,000 = $110,000 in tappable equity
Even though you have $215,000 in total equity, you can only access $110,000 under the standard 80% CLTV rule.
Why lenders require a 15–20% equity cushion
The equity cushion protects the lender. If home values decline, that buffer ensures the loan is still secured by more collateral than the outstanding balance. It also protects borrowers from going underwater—owing more than their home is worth—if the market softens.
The Consumer Financial Protection Bureau notes that lenders set these limits to balance risk for both parties. Some lenders, particularly credit unions or portfolio lenders, will go up to 85% or even 90% CLTV for well-qualified borrowers, but 80% remains the standard.
How much equity you can actually access
Your tappable equity is the ceiling, not the guarantee. Your actual loan approval will also depend on your credit score, debt-to-income ratio, employment history, and the specific product you’re applying for. Think of tappable equity as your maximum potential—what you’d qualify for under ideal credit conditions.
How much of your equity can you use? (By product)
Different borrowing products have different rules about how much equity you can tap and how.
Home equity loan and HELOC limits
Both home equity loans and home equity lines of credit (HELOCs) are second mortgages. Most lenders allow you to borrow up to 80–85% CLTV, though some go higher. The Federal Reserve’s H.15 Statistical Release, which tracks consumer and mortgage interest rates, shows that home equity lending rates closely track the federal funds rate—meaning your borrowing costs shift with broader monetary policy.
A home equity loan delivers a lump sum at a fixed rate. A HELOC works like a credit card—you draw what you need, up to your limit, during a draw period (typically 10 years), then repay it.
Cash-out refinance limits
A cash-out refinance replaces your existing mortgage with a new, larger one. You receive the difference in cash. Conventional loans typically allow cash-out refinancing up to 80% LTV. VA loans allow up to 90% LTV for eligible veterans, and FHA cash-out refinances cap at 80% as well.
The trade-off: you’re resetting your entire mortgage, which means new closing costs (typically 2–5% of the loan amount) and potentially a higher rate if current rates exceed your original loan’s rate.
Home equity agreement limits
A Home Equity Agreement (HEA), sometimes called a shared equity agreement, is a different structure entirely. Rather than a loan, an HEA allows a homeowner to receive a lump sum today in exchange for agreeing to share a portion of the home’s future value change with an investor. There are no monthly payments during the agreement term, but there is a future obligation: when you sell, refinance, or reach the end of the agreement period, you settle up based on how your home’s value has changed—which could mean a larger repayment if your home has appreciated significantly.
According to the FTC’s consumer guidance on home equity products, shared equity models have grown as an option for homeowners seeking alternatives to traditional debt-based products. HEA limits vary by provider but typically allow access to 10–20% of your home’s value, and most require you to maintain a minimum equity stake.
How to increase your home equity over time
Home equity grows in two ways: you pay down your loan, or your home’s value rises. You have more control over the first than the second—but both matter.
- Make extra principal payments. Even one extra payment per year can shave years off a 30-year mortgage and meaningfully accelerate equity growth. Direct the payment specifically to principal to ensure it reduces your balance.
- Choose a shorter loan term. A 15-year mortgage typically builds equity more quickly than a 30-year loan because a larger portion of each payment goes to principal from the start. The trade-off is a higher monthly payment.
- Avoid cash-out borrowing unless it serves a clear purpose. Tapping equity resets your progress. If you refinance or take a home equity loan, your equity position drops. Borrowing against your home to fund depreciating assets (vacations, vehicles) erodes long-term wealth.
- Invest in strategic home improvements. Not all renovations return their cost, but certain projects consistently add value. According to the National Association of Realtors’ 2024 Remodeling Impact Report, projects like new roofing, hardwood floor refinishing, and kitchen upgrades tend to recoup 70–100% of their cost in added home value.
- Let time and the market work. The FHFA House Price Index tracks U.S. home price trends over time and consistently shows long-term appreciation in most markets. Staying in your home longer, rather than selling and rebuying, avoids transaction costs and allows equity to compound.
Home equity calculator
Use this formula as your personal home equity calculator:
- Determine your home’s current market value (use a professional appraisal, average of multiple AVMs, or recent comps).
- Find your current mortgage payoff balance from your servicer’s portal or latest statement.
- Subtract all outstanding liens (first mortgage + any HELOCs or second mortgages) from the home value.
- Divide your equity by the home value to find your equity percentage.
- Multiply your home value by 0.80, then subtract your mortgage balance to find your tappable equity.
| Variable | Your Number |
| Home’s current market value | $_______ |
| First mortgage balance | $_______ |
| HELOC / second mortgage balance | $_______ |
| Total equity (value minus all balances) | $_______ |
| Equity percentage (total equity ÷ value) | _______ % |
| Tappable equity (value × 0.80 − mortgage) | $_______ |
Recalculate this at least once a year, or any time you’re considering borrowing against your home. Your equity position is the foundation of every home financing decision you make.
Frequently asked questions
Subtract your outstanding mortgage balance (and any HELOC or second mortgage balances) from your home's current market value. That's your equity. To find a reasonable market value estimate without paying for an appraisal, average the estimates from two or three AVM tools like Zillow, Redfin, and Realtor.com, then cross-check against recent comparable sales in your neighborhood. The number will be approximate, but it gives you a reliable working figure for planning purposes.
A common benchmark is 20% equity, because that's typically the threshold that can unlock more favorable lending terms and eliminate private mortgage insurance (PMI) on conventional loans. However, 20% is really a floor, not a goal. Equity of 40–50% or more gives you meaningful financial leverage—lower rates on home equity products, a larger borrowing cushion, and greater protection if home values decline. The more equity you hold, the stronger your financial position.
Use the tappable equity formula: multiply your home's current value by 0.80, then subtract your existing mortgage balance. The result is the maximum you could borrow under a standard 80% combined loan-to-value limit. Your actual approved amount will depend on your credit profile, income, and the lender's specific guidelines—but this calculation tells you the ceiling before you apply.
No. Home value is what your property is worth on the market. Home equity is what you own—the portion of that value not encumbered by debt. A $600,000 home with a $500,000 mortgage has only $100,000 in equity, even though its value is $600,000. Equity and value move in the same direction (rising home prices increase equity), but they are not the same number.
Yes, your down payment is immediate equity. When you close on a home, the down payment represents the portion you own outright from day one. A 20% down payment on a $400,000 home means you start with $80,000 in equity. From there, equity grows as you pay down your principal and as your home's value appreciates.
Include the outstanding HELOC balance in your total debt calculation. Home Equity = Current Home Value − First Mortgage Balance − HELOC Outstanding Balance. Note that a HELOC has a credit limit and a drawn balance—only the amount you've actually borrowed counts against your equity. If you have a $50,000 HELOC but have only drawn $15,000, subtract $15,000 (the outstanding balance), not $50,000. However, lenders will consider your full HELOC limit when evaluating new applications, since you could draw the remaining funds at any time.
At minimum, recalculate once a year. In a fast-moving market, quarterly recalculations are worth the few minutes they take. Always recalculate before applying for any home equity product, before refinancing, when considering a major home improvement, and when evaluating whether to sell. Your equity position is the foundation of every home financing decision—keeping it current ensures you're always working with accurate information.
Considering alternatives to traditional loans? Consider JG Wentworth’s home equity agreement product
If a traditional loan isn’t the right fit, JG Wentworth offers a Home Equity Cashout (HEC), which is our Home Equity Agreement (HEA) product. With a JG Wentworth Home Equity Cashout, you can receive cash today in exchange for a share of your home’s future value, with no monthly payments and without replacing your current mortgage. **
- Get cash upfront: Check your eligibility in minutes and see how much equity could be available to you.
- Use it for what you need: Apply it toward debt, expenses, or goals, with no monthly payments, subject to program terms.
- Settle on your timeline: Settle your JG Wentworth Home Equity Cashout within 10 years through sale, refinance, or an approved buyout option.
Get a free estimate today and see how much you could get.
* This information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that You consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions.
** Home Equity Cashouts are originated by JGW Residential. LLC (NMLS ID # 2669687 in CO, GA, IL, and WA) NMLS – Consumer Access – Company
A Home Equity Cashout is not a traditional loan and does not require monthly payments. However, it involves a future financial obligation based on the value of your home at the time of sale or another triggering event. In the event of an uncured default JGW has the right to become co-owners of the property, to declare the payoff amount immediately due, and to sell or foreclose on the property, among other rights. Product classification may vary by state, and in some jurisdictions, this agreement may be considered a reverse mortgage or credit obligation. Please consult with a licensed advisor or attorney to understand how this product may be treated under local law. Licenses.
SOURCES CITED
- Federal Reserve, Financial Accounts of the United States (Z.1 Release) — Home price appreciation trends
- Consumer Financial Protection Bureau, “What is a home equity loan?” — CLTV limits and lender risk requirements
- Federal Reserve, H.15 Statistical Release — Consumer and mortgage interest rate trends
- Federal Trade Commission, Consumer Guidance on Home Equity Loans and Lines of Credit — Alternative home equity products
- National Association of Realtors, 2024 Remodeling Impact Report — ROI on home improvement projects
- Federal Housing Finance Agency, House Price Index (HPI) — Long-term U.S. home price appreciation data
About the author
Recommended reading for you
*Any information provided on this site is for educational purposes only. JGW Connects, LLC is not an agent of you or any third party advertiser on this website. You should rely on your own judgement in deciding which available product, terms and provider that best suits your personal financial requirements. We do not offer financial advice, advisory or brokerage services. We recommend that you consult with our own independent advisors regarding these products and services
JGW Connects, LLC is an independent, advertising-supported comparison site and marketing lead generator and does not play a role in decisioning for any of the third party products advertised on this webpage. JGW Connects, LLC and the JG Wentworth Company family of companies are not affiliated with the companies advertising on this webpage. You are not charged for our services. JGW Connects, LLC may receive a referral fee or other affiliate fee for connecting you with these third-party companies or upon you contracting with a third-party company. We do not make any guarantees that these are the only providers in the marketplace, or that their products or services will meet your needs. The products and services presented to you may or may not be the best, or only options, available.
JGW Connects does not provide any of the products or services advertised and does not make any decisions regarding your eligibility for those products or services. All decisions regarding approval or denial of a particular product or service are the responsibility of the participating company and will vary based upon your particular financial situation, and criteria determined by the company to whom you are matched. Not all consumers will qualify for the advertised rates and terms.
