Calculate how much equity you have in your home, your loan-to-value ratio, and roughly how much you might be able to borrow through a home equity loan or HELOC.
What is home equity?
Home equity is the part of your home you own outright: its current market value minus everything you still owe on it. It grows in two ways: as you pay down your mortgage, and as your home's value rises.
Home equity = Home value − mortgage balance − other loans secured by the home
Loan-to-value (LTV) = Total owed ÷ home value × 100
How much can you borrow against your home?
Lenders usually cap the combined loan-to-value (CLTV), meaning all loans on the home together, at around 80% to 85% of its value. The amount you could borrow is that limit minus what you already owe:
Borrowing power = Home value × CLTV limit − total owed
Worked example
Your home is worth $400,000 and you owe $250,000 on your mortgage.
- Equity: $400,000 − $250,000 = $150,000, or 37.5% of the home's value.
- Loan-to-value: $250,000 ÷ $400,000 = 62.5%.
- At an 80% CLTV limit, lenders would allow up to $320,000 in total loans, so you might borrow up to about $70,000.
Home equity loan or HELOC?
- Home equity loan: a lump sum with a fixed rate and fixed monthly payments. Good for one known expense.
- HELOC (home equity line of credit): a credit line you draw on as needed, usually with a variable rate. Good for ongoing projects.
Both use your home as collateral, so missing payments can put the home at risk. Borrowing to pay off high-interest debt only helps if you avoid building that debt up again.
How to estimate your home's value
Look at recent sale prices of similar homes nearby, check online estimates as a rough guide, or ask a real estate agent for a comparative market analysis. A lender will order a professional appraisal before approving a loan.
Frequently asked questions
What is a good loan-to-value ratio?
80% or lower is generally considered healthy. It usually means no PMI and access to better refinance and home equity rates.
Does paying extra on my mortgage build equity?
Yes. Every extra principal payment increases your equity dollar for dollar. Model it with the loan payoff calculator.
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Results are estimates for planning and education only. They are not financial, tax, legal or medical advice. Check important numbers with a qualified professional.