How to Calculate What Your Home Equity Is Worth and What You Can Borrow Against It
What home equity is and why the number matters
Home equity is the difference between what your home is worth right now and what you still owe on your mortgage. If your house is worth $300,000 and you owe $180,000, your equity is $120,000. That number matters because it determines how much you can borrow through a home equity loan or line of credit, and it affects how much cash you walk away with if you sell.
Lenders typically let you borrow 80 to 90 percent of your home's current value, minus what you still owe. So if you have $120,000 in equity, you might be able to borrow $30,000 to $50,000, depending on your credit score, income, and the lender's rules. The exact amount varies by lender and by how much risk they're willing to take on.
Key Takeaways
- Home equity equals your home's current market value minus your remaining mortgage balance, and you can find both numbers yourself or ask your lender for them.
- Most lenders let you borrow between 80 and 90 percent of your home's value, minus what you owe, but the exact percentage depends on your credit and income.
- Your home's value can be estimated using online tools, recent comparable sales in your neighborhood, or a professional appraisal, which costs $300 to $500.
- Borrowing against your equity puts your home at risk if you cannot repay, so compare the interest rate and terms to other borrowing options before you decide.
Finding your home's current value
You need two numbers to calculate equity: what your home is worth now and what you owe. Start with value. Your mortgage lender knows what they appraised it at when you bought or refinanced, but that number is old and your home may have changed in value since then.
Online tools like Zillow, Redfin, and Realtor.com give free estimates based on recent sales of similar homes near you. These estimates are usually within 5 to 10 percent of actual value, but they are not perfect—they cannot account for major repairs you made or damage the algorithm does not know about. A more reliable option is to look at the actual sale prices of homes similar to yours that sold in your neighborhood in the last three to six months. Your real estate agent can pull this data for free, or you can search your county assessor's website.
If you need a precise number—because you are applying for a large loan or refinancing—you can order a professional appraisal from an appraiser licensed in your state. An appraisal costs $300 to $500 and takes one to two weeks. The appraiser physically inspects your home and compares it to recent sales, so the result is much more reliable than an online estimate.
Finding what you still owe
Your mortgage lender can tell you your exact balance in one phone call or through your online account. Log into your lender's website or app and look for "loan balance," "principal balance," or "payoff amount." If you cannot find it online, call the customer service number on your mortgage statement.
If you have more than one loan on the home—a first mortgage and a home equity line of credit, for example—you need the balance on each one. Add them together to get your total debt. Subtract that total from your home's current value, and you have your equity.
The math: calculating how much you can borrow
Once you have your home's value and your loan balance, the calculation is straightforward. Most lenders use an 80 percent loan-to-value ratio, meaning they will lend you up to 80 percent of your home's value. Some lenders go to 85 or 90 percent if your credit is strong and your income is stable, but 80 percent is the standard.
Here is the formula:
- Home's current value × 0.80 = maximum loan amount the lender will consider
- Maximum loan amount − what you still owe = how much you can borrow
Example: Your home is worth $300,000. You owe $180,000 on your mortgage. The lender's maximum is $300,000 × 0.80 = $240,000. You can borrow up to $240,000 − $180,000 = $60,000.
That $60,000 is your available equity. Not every lender will offer you the full amount—your credit score, debt-to-income ratio, and employment history matter too. But that number tells you the ceiling.
Why your credit score and income affect the final number
Even if you have $60,000 in available equity, a lender may offer you less if your credit score is below 620 or if your monthly debt payments are already high compared to your income. Lenders calculate your debt-to-income ratio by adding up all your monthly debt payments—mortgage, car loans, credit cards, student loans—and dividing by your gross monthly income. Most lenders want this ratio to be 43 percent or lower.
If you have a strong credit score (above 740) and a low debt-to-income ratio, you are more likely to get the full amount at a lower interest rate. If your credit is fair or your debt-to-income ratio is high, the lender may offer you less, charge you a higher rate, or ask you to pay points upfront to lower the rate.
Home equity loans versus lines of credit: the payment difference
Once you know how much you can borrow, you need to decide what type of loan to take. A home equity loan gives you a lump sum upfront and a fixed monthly payment over a set term, usually 5 to 15 years. A home equity line of credit (HELOC) works like a credit card: you can draw money as you need it, pay interest only on what you use, and your payment changes each month.
With a home equity loan, your payment is predictable. If you borrow $30,000 at 7 percent over 10 years, your monthly payment is roughly $350. With a HELOC, your payment depends on how much you have borrowed and what the interest rate is at any given time. If rates rise, your payment rises too. HELOCs are better if you need money gradually; home equity loans are better if you need a specific amount now and want a fixed payment.
What happens if you cannot repay
Home equity loans and lines of credit are secured by your home, meaning if you stop paying, the lender can foreclose and take your house. This is different from credit card debt or personal loans, which are unsecured. That security is why home equity borrowing usually has a lower interest rate than other types of loans—but it also means the stakes are higher.
Before you borrow against your equity, compare the interest rate and monthly payment to other options: a personal loan, a credit card balance transfer, or a cash-out refinance. A personal loan has a higher rate but does not put your home at risk. A cash-out refinance replaces your entire mortgage with a larger one, so your payment spreads over a longer time but you are borrowing against your home either way. Run the numbers for each option and pick the one that fits your budget and your comfort level with risk.
Frequently Asked Questions
Can I borrow more than 80 percent of my home's value?
Some lenders will go to 85 or 90 percent if your credit score is above 740 and your debt-to-income ratio is below 36 percent. Borrowing at a higher ratio means you pay a higher interest rate and carry more risk—if your home's value drops, you could owe more than it is worth. Ask your lender what their maximum is before you apply.
What if my home's value has dropped since I bought it?
If you owe $200,000 and your home is now worth $180,000, you have negative equity and cannot borrow against it. You would need to pay down your mortgage or wait for the home's value to rise before you have equity to borrow. Some lenders offer loans to borrowers with negative equity, but the rates are much higher and the terms are stricter.
Do I have to use the full amount I am offered?
No. If you are offered a $50,000 line of credit, you can draw $10,000 now and leave the rest available for later. With a home equity loan, you receive the full amount upfront, so you only borrow what you actually need. With a HELOC, you pay interest only on what you draw, so you can keep the line open and use it when you need it.
How long does it take to get approved for a home equity loan?
Most lenders take 5 to 10 business days to approve a home equity loan after you submit your application and documents. If they need an appraisal, add another 1 to 2 weeks. A HELOC can sometimes close faster because lenders often do not require a new appraisal if you refinanced recently.
Will getting a home equity loan hurt my credit score?
A hard inquiry and a new account will lower your score by a few points temporarily. Your score usually recovers within a few months as you make on-time payments. If you already have high credit card balances, adding another loan could lower your score more because your total available credit decreases.