How to calculate your home equity
Home equity is simple: it's your home's current market value minus everything you still owe against it. If your home is worth $400,000 and your mortgage balance is $250,000, you have $150,000 in equity — the portion of the home you truly own.
You can't usually borrow your full equity, though. Lenders cap your combined loan-to-value (CLTV) — typically 80–85% of the home's value across all loans. So the cash you can actually pull out is that capped amount minus what you already owe, which is what this calculator shows.
Ways to turn equity into cash
- Cash-out refinance — replace your mortgage with a larger one and take the difference as a lump sum.
- Home equity line of credit — a flexible credit line on top of your existing mortgage.
- Reverse mortgage — for homeowners 62+, with no required monthly payment.
The formula
Two quick equations drive this calculator:
Equity = home value − total owed
Borrowable cash = (home value × CLTV cap) − total owed
The first line is the equity you own outright. The second is what you can actually pull out: lenders cap your combined loan-to-value (CLTV) — the sum of all loans against the home divided by its value — at roughly 80–85%. So you can borrow up to that capped amount, minus whatever you still owe.
Worked example
Your home is worth $400,000 and you owe $250,000. Your equity is $150,000. At an 85% CLTV cap, lenders would allow up to $400,000 × 0.85 = $340,000 in total loans; subtract the $250,000 you already owe and you could access about $90,000 in new borrowing — not the full $150,000 of equity, because the bank keeps a cushion.
How much of your equity can you borrow?
The CLTV cap depends on the product and the lender:
| Product | Typical CLTV cap | Payment |
|---|---|---|
| Home equity loan | 80–85% | Fixed, second payment |
| HELOC | 80–85% | Variable, draw as needed |
| Cash-out refinance | 80% | One new fixed payment |
| Reverse mortgage | Varies by age (PLF) | None required (62+) |
What changes how much you can access
- Your credit score — higher scores unlock higher CLTV caps and better rates.
- Your income and DTI — lenders confirm you can repay any new loan.
- The product — a cash-out refinance is often capped at 80%, while loans and lines may reach 85%.
- Your existing balance — the more you still owe, the less new cash is left under the cap.
When tapping your equity makes sense
Good uses include value-adding home improvements, consolidating higher-interest debt, or covering a large planned expense at a far lower rate than credit cards. Be cautious using home equity for everyday spending or depreciating purchases — the debt is secured by your house, so anything you can't comfortably repay puts the home at risk. Compare the routes with our HELOC, cash-out refinance, and reverse mortgage calculators.
How to build home equity faster
Equity grows two ways: your home's value rises, and your loan balance falls. You can speed up the second:
- Make extra principal payments. Even $100 a month chips directly at the balance and compounds over the life of the loan.
- Switch to biweekly payments. Paying half your mortgage every two weeks adds up to one extra full payment a year.
- Add value with targeted renovations. Kitchens, baths, and energy upgrades tend to return the most at resale.
- Avoid resetting your balance. Repeated cash-out borrowing pushes equity back down — borrow only for productive uses.
- Let appreciation work. In a rising market, simply holding the home builds equity with no extra effort.
Frequently asked questions
How do I calculate my home equity?
How much of my equity can I borrow?
Is there an age requirement?
Sources: CFPB — Mortgages · CFPB Owning a Home · our methodology.