Home equity is the portion of your property's value that you actually own. It is the foundation of any home-equity financing.
The basic math
Equity is broadly the difference between your home's current value and what you still owe on it. As you pay down your mortgage or your home's value rises, equity generally grows.
Available vs. total equity
Not all equity is accessible. Lenders typically look at how much can be borrowed against while leaving a cushion, which is where measures like loan-to-value come in.
Turning equity into capital
Home-equity financing lets eligible owners access a portion of that equity. How much is available depends on value, existing balances, and underwriting.
Equity is a moving number
Equity
Current property value − All debt secured by the propertyTwo forces move it
| Driver | Effect on equity | Pace |
|---|---|---|
| Principal paydown | Increases equity | Gradual and predictable |
| Property appreciation | Increases equity | Variable and market-driven |
| Additional liens | Decreases equity | Immediate |
| Market decline | Decreases equity | Variable |
Know before estimating
- A defensible current value, not the purchase price
- The payoff balance, not the original loan amount
- Every recorded lien, including tax and judgment liens
- Occupancy type, which affects program ceilings
Related financing
Educational content. This guide is general information, not financing, legal, tax, or accounting advice, and is not an offer or a commitment to provide financing. Availability, amounts, terms, and structures vary by applicant and program and are subject to underwriting and approval.
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