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
Calculating it
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 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? 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) — 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
Sources
- Fannie Mae Eligibility Matrix — Fannie Mae cash-out refinance maximum LTV, one-unit principal residence (Apr 1, 2026)
- FHFA House Price Index — US house prices, 12-month change (FHFA HPI) (August 2026)
- CFPB: What is a home equity loan? (defines equity)
- FTC: Home equity loans and home equity lines of credit
Last reviewed Figures are checked against the sources above. Read our editorial policy. This page is general information, not financial advice — see the disclaimer.