# Home equity

> Home equity is your home’s current market value minus everything you owe against it. How to calculate it, how it grows and how much you can borrow.

URL: https://mortgage-math-us.com/glossary/home-equity/  
Last reviewed: 2026-10-29 · By the MortgageMath US Editorial team

## Quick answer

**Home equity** is the part of your home you own outright: its current market value minus the balances of every loan secured by it, such as your mortgage, a home equity loan or a HELOC.

## Key facts

| Fact | Value | Source | As of |
|---|---|---|---|
| US house prices, 12-month change | 2.4% | [FHFA House Price Index](https://www.fhfa.gov/news/news-release/fhfa-house-price-index-up-0.3-percent-in-august-up-2.4-percent-from-last-year) | August 2026 |
| Fannie Mae cash-out limit, one-unit primary home | 80% | [Fannie Mae Eligibility Matrix](https://singlefamily.fanniemae.com/media/20786/display) | Apr 1, 2026 |

## Calculating it

> **Worked example: A $400,000 home**
>
> You owe $240,000 on the mortgage and $20,000 on a HELOC. Equity: $400,000 − $240,000 − $20,000 = $140,000, or 35% of the value. Your [combined loan-to-value](https://mortgage-math-us.com/glossary/combined-loan-to-value/) is 65%.

Lenders won’t let you borrow all of it. A Fannie Mae cash-out refinance, for example, stops at 80% loan-to-value, which here would leave about $60,000 available before closing costs. The guide [How much equity can you borrow?](https://mortgage-math-us.com/home-equity/how-much-equity/) runs the limits for each option.

## How equity changes

It grows as you pay down principal — slowly at first, because early payments are mostly interest (see [amortization](https://mortgage-math-us.com/glossary/amortization/)) — and as prices rise: US house prices changed by 2.4% over the latest 12 months in FHFA’s index, though your local market can differ widely. It shrinks when you borrow against the home or prices fall; if you owe more than the home is worth, you have negative equity.

## Related terms

- [Home equity loan](https://mortgage-math-us.com/glossary/home-equity-loan/) and [HELOC](https://mortgage-math-us.com/glossary/heloc/)

## Sources

- [Fannie Mae Eligibility Matrix](https://singlefamily.fanniemae.com/media/20786/display) — Fannie Mae cash-out refinance maximum LTV, one-unit principal residence (Apr 1, 2026)
- [FHFA House Price Index](https://www.fhfa.gov/news/news-release/fhfa-house-price-index-up-0.3-percent-in-august-up-2.4-percent-from-last-year) — US house prices, 12-month change (FHFA HPI) (August 2026)
- [CFPB: What is a home equity loan? (defines equity)](https://www.consumerfinance.gov/ask-cfpb/what-is-a-home-equity-loan-en-106/)
- [FTC: Home equity loans and home equity lines of credit](https://consumer.ftc.gov/articles/home-equity-loans-and-home-equity-lines-credit)

_General information, not financial advice._