The quick answer: home equity = your home’s current market value minus everything you still owe against it (your mortgage, plus any second mortgage, HELOC balance, or liens). If your home is worth $400,000 and you owe $250,000 across all loans secured by it, your equity is $150,000.
That’s the whole calculation. The harder part is getting an accurate value for your home and remembering to count every loan tied to it, not just your first mortgage. Here’s how to do both, plus what your equity number can and can’t tell you.
Key takeaways
Table of Contents
The Calculation - Step by Step
Four steps get you there. Here’s the flow.
Home Value, Equity, and Borrowable Equity
This trips people up more than the math itself. There are really three separate numbers in play, and mixing them up leads to bad assumptions about how much you can actually access.
Home value is what the property is worth right now, full stop, independent of any debt. Home equity is that value minus everything you owe. Borrowable equity is smaller still: it’s the portion a lender will actually let you tap, since almost no lender will finance you up to 100% of your home’s value. They want a cushion in case prices dip or you fall behind on payments.
The infographic below shows what tends to build your equity over time versus what works against it.
Total homeowner equity figure reflects Cotality’s Q3 2025 Homeowner Equity Report. Typical LTV and closing cost figures are general market ranges and vary by lender and location.
Real World Example with Two Loans
Numbers make this concrete faster than definitions do, so here’s a fuller version of the calculation.
Maria bought her house for $280,000 several years ago. It’s now worth $410,000, based on a recent home value estimate. She still owes $195,000 on her original mortgage. Two years ago she took out a $35,000 home equity loan to redo her roof and update the kitchen, and she’s paid that down to $28,000.
- Home value: $410,000
- First mortgage balance: $195,000
- Home equity loan balance: $28,000
- Total secured debt: $223,000
- Home equity: $187,000
That $187,000 is Maria’s equity. It’s not what she’d walk away with if she sold, and it’s not automatically what a lender would let her borrow against. If she wanted to pull equity out of her home for another purchase, a lender would apply their own LTV limits on top of this number, not hand over the full $187,000.
How To Estimate Your Home's Current Value
The calculation only works if the value you plug in is realistic. A few ways to get there, roughly in order of accuracy:
- A formal appraisal. The most precise option, and usually required if you’re applying for a home equity loan or HELOC.
- Comparable sales. A real estate agent or investor can pull recent sale prices for similar homes nearby.
- Online valuation tools. Quick and free, though they’re estimates, not appraisals. New Silver’s home value estimator is a reasonable starting point if you want a ballpark figure before committing to anything formal. If you want to see how much your value has shifted over time, the home appreciation calculator is useful for that too.
- An investor-focused ARV calculation. If you’re weighing a renovation or planning to sell after improvements, New Silver’s ARV calculator estimates what a property could be worth after repairs, which is a different question than what it’s worth today, but a useful one if you’re deciding whether to improve or sell as-is.
Whichever route you take, use today’s value, not your original purchase price. That distinction is where a lot of equity miscalculations start.
What Your Equity Number Can't Tell You
Equity and cash in hand are two different things, and conflating them is one of the most common mistakes homeowners make. If Maria from the example above sold her house tomorrow, she wouldn’t pocket $187,000. Real estate commissions, transfer taxes, escrow fees, and other closing costs typically run 8% to 10% of the sale price. On a $410,000 home, that’s $33,000 to $41,000 before she even gets to paying off her loans.
So her actual proceeds would look closer to $146,000 to $154,000, not $187,000. Same equity, meaningfully different number in her pocket. If you’re calculating equity to plan a sale, budget for these costs from the start rather than treating your equity figure as a final answer.
How much of your equity can you actually borrow?
This is where loan-to-value (LTV) and combined loan-to-value (CLTV) ratios come in. Your LTV is your loan balance divided by your home’s value. If Maria’s mortgage balance is $195,000 against a $410,000 home, her LTV is about 48%. Add the home equity loan and her CLTV climbs to roughly 54%.
Most conventional lenders want your LTV at 80% or lower before they’ll extend new financing, and CLTV limits for a second loan usually top out somewhere between 80% and 90%, depending on the lender and loan type. If you want a deeper breakdown of how LTV compares to loan-to-cost for investment purchases, that’s covered in more detail here.
The table below breaks down how the common ways to access home equity compare, including an option built for real estate investors rather than owner-occupants.
| Loan type | How it works | Typical max LTV/CLTV | Best for |
|---|---|---|---|
| Home equity loan | Lump sum with a fixed rate, repaid in set monthly installments. | Up to 85% CLTV | A one-time, predictable cost like a renovation or debt payoff. |
| HELOC | Revolving credit line with a variable rate. Draw funds as needed. | Up to 85% CLTV | Ongoing or uncertain costs, like a phased remodel. |
| Cash-out refinance | Replaces your existing mortgage with a larger one and pays out the difference in cash. | Up to 80% LTV | Homeowners already refinancing who want a single new payment. |
| New Silver rental loan (DSCR) | Financing based on a property's rental income rather than personal income. | Often up to 80% LTV | Investors pulling equity to buy or refinance a rental property. |
A HELOC and a home equity loan both use your primary residence as collateral and follow standard consumer lending rules. If you’re weighing whether to use equity to buy an investment property instead, it’s worth running the numbers on the rental side before deciding how to structure the financing, since a DSCR loan qualifies you based on the property’s income rather than your personal debt-to-income ratio.
Should You Actually Borrow Against Your Equity?
That depends entirely on what you’re using it for. Homeowners weighing using equity to buy a second property or cash-out refinancing to fund a purchase are generally in reasonable territory, along with funding a renovation that adds real value or consolidating high-interest debt you won’t run back up. Borrowing to cover ongoing expenses you can’t otherwise afford is a much riskier bet, since your home is the collateral either way. If you’re leaning toward using equity to grow your investment portfolio rather than cover a personal expense, it’s worth getting a loan quote to see what terms you’d actually qualify for before committing to a plan.
