Home equity is the share of your home you truly own — its market value minus what you still owe. As you pay down your mortgage and your home appreciates, that equity grows into one of the most powerful financial assets most households have. This calculator shows your current equity and estimates how much you could borrow against it with a home equity loan or line of credit (HELOC).
How equity and borrowing limits are calculated
Equity is simply home value minus mortgage balance. Lenders, however, will not let you borrow all of it. They cap your combined loan-to-value (CLTV) ratio, usually at 80–85%. Your available borrowing power is roughly (home value × CLTV limit) − current mortgage balance.
A worked example
If your home is worth $500,000 and you owe $300,000, you have $200,000 in equity. With an 85% CLTV cap, a lender allows total loans up to $425,000. Subtract your $300,000 mortgage and you could borrow about $125,000 through a HELOC or home equity loan.
Loan vs. line of credit
A home equity loan gives you a lump sum at a fixed rate — good for a one-time expense. A HELOC works like a credit card secured by your home, with a variable rate and a draw period during which you borrow as needed. Both use your house as collateral, so missed payments put your home at risk.
Using home equity wisely
- Reserve equity borrowing for value-adding uses like home improvements or consolidating higher-interest debt.
- Remember that borrowing against equity reduces the cash you walk away with when you sell.
- Variable-rate HELOCs can get more expensive if rates rise — budget for higher payments.
- Keep some equity untouched as a cushion against market dips that could leave you underwater.