Quick answer
Home equity is your home's value minus what you owe on it. A $450,000 home with a $285,000 mortgage holds $165,000 of equity — 36.7% of the value. Lenders typically let you borrow against part of it: at an 80% combined loan-to-value cap, accessible equity on this home is $75,000; at 90% it is $120,000.
How the Home Equity Calculator works, step by step
Enter your home's current market value and the balances of every loan secured on it — first mortgage, HELOC, home equity loan. The calculator subtracts total debt from value and expresses the result in dollars and as a percentage of the home's value (your equity position; one minus the combined loan-to-value). On the default figures the loan-to-value is 63.3%.
Then it applies a lender cap. Most lenders cap combined loan-to-value at 80% to 90% for equity products, so the full equity figure is not borrowable. The accessible amount is (cap × value) − existing balances, which the calculator shows at three caps: 80%, 85% and 90%. The higher the cap, the more you can borrow — and the higher the rate a lender usually charges for the privilege.
Equity changes from three directions: principal repayment (slow, reliable), appreciation (fast, unreliable) and new borrowing (instant, negative). Track which one moved your number. Equity built by appreciation can vanish in a downturn, which is why borrowing against the full appraised value at a market peak is how households end up owing more than the home is worth.
Principal repayment is slower than most borrowers expect. On a new $285,000 loan at 6.5% over 30 years, only about $258 of the first payment is principal — the rest is interest. Equity from repayment builds meaningfully only in the later years of a loan, which is why extra principal payments are the fastest lever you control: they move the balance down on a schedule you choose.
Borrowing against equity is borrowing against your home, with the home as collateral. A home equity loan is a fixed lump sum with a fixed rate and payment; a HELOC is a revolving line, usually with a variable rate, a draw period (often 10 years, interest-only) and then a repayment period. HELOC rates move with the prime rate, so a line opened at 8% can be at 10% within a year; the loan's fixed rate cannot.
The formula
Equity = Home value − total mortgage balances. Equity % = equity ÷ home value. Accessible equity at a lender cap = (CLTV cap × home value) − existing balances.
Worked example — try it on the calculator above
Worked example: $450,000 home, $285,000 mortgage
Equity = $450,000 − $285,000 = $165,000, which is 36.7% of the value (combined LTV 63.3%). At an 80% CLTV cap, total borrowing against the home may reach $360,000, so accessible equity is $360,000 − $285,000 = $75,000. At an 85% cap the accessible figure is $97,500, and at a 90% cap — offered by some lenders at higher rates — it rises to $120,000, but the payment and risk rise with it. None of these figures is the full $165,000: lenders keep a buffer between what you owe and what the home is worth.
Frequently Asked Questions
How can I build equity faster?
Principal payments are the lever you control: extra monthly payments, a lump sum, or a shorter loan term all move the balance down faster than the standard schedule. Appreciation may help but cannot be scheduled. Note that in the early years of a 30-year mortgage, scheduled principal is small — on a $285,000 balance at 6.5%, only about $258 of the first payment is principal.
HELOC or home equity loan — what is the difference?
A home equity loan is a fixed lump sum with a fixed rate and payment, disbursed once. A HELOC is a revolving credit line, usually with a variable rate, a draw period (often 10 years, interest-only) and then a repayment period. HELOC rates move with the prime rate, so a line opened at 8% can be at 10% within a year; the loan's fixed rate cannot.
Is home equity loan interest tax-deductible?
Only when the borrowed money is used to buy, build or substantially improve the home securing the loan, and only if you itemise deductions, within the overall $750,000 acquisition-debt cap for newer loans. Interest on equity borrowed for other purposes — debt consolidation, a car, tuition — has not been deductible since 2018.
How is my home's value determined for an equity loan?
The lender orders an appraisal or an automated valuation. The number that matters is the lender's value, which may come in below your estimate; a low appraisal shrinks accessible equity directly. If you disagree, you can pay for a full appraisal or apply elsewhere, but the same valuation data drives most lenders' models.
Estimates, not advice. This calculator provides educational estimates based on the inputs you enter and the assumptions shown on this page. It is not financial, tax or investment advice, and it cannot see your full situation. Verify important figures against official sources, and consider a qualified professional for decisions about your own money. See our Disclaimer and Methodology.