Find out exactly how much equity you’ve built in your home and how much borrowing power it unlocks. Enter your current home value and mortgage balance to see your equity position, LTV ratio, and maximum HELOC amount — all in seconds.
Pro tip: Most lenders cap HELOC borrowing at 80–85% of your home’s value minus your mortgage balance. If your equity exceeds 20%, you likely qualify for a HELOC — but the more equity you have, the better your rate and terms will be.
| Year | Home Value | Est. Balance | Equity | Equity % |
|---|
Cash-Out Refinance
HELOC
How to Use the Home Equity Calculator
Start by entering your home’s current market value — use a recent appraisal, comparable sales in your neighborhood, or an online home value estimate. Then add your original purchase price and original loan amount to see how much your home has appreciated and how much principal you’ve paid down. Finally, enter your current mortgage balance (found on your latest statement or lender portal) to calculate your total equity and HELOC borrowing power.
What Is Home Equity?
Home equity is the difference between your home’s current market value and what you still owe on your mortgage. If your home is worth $450,000 and you owe $245,000, you have $205,000 in equity. Equity builds in two ways: through principal paydown (the portion of each mortgage payment that reduces your balance) and through appreciation (the increase in your home’s market value over time). The national average appreciation rate has historically been around 3–5% per year, though this varies enormously by market and time period.
Understanding LTV and Why It Matters
The Loan-to-Value ratio (LTV) is your mortgage balance divided by your home’s appraised value, expressed as a percentage. An LTV of 75% means you owe 75% of what your home is worth and have 25% equity. Lenders use LTV as a key risk metric — lower LTV means less risk for the lender and typically unlocks better interest rates, eliminates PMI requirements, and increases your borrowing capacity for HELOCs or cash-out refinances. Dropping below 80% LTV is the critical threshold where most borrowers can remove private mortgage insurance and qualify for home equity lending.
HELOCs: How They Work and How Much You Can Borrow
A Home Equity Line of Credit (HELOC) lets you borrow against your equity as a revolving line of credit, similar to a credit card but with much lower interest rates because your home serves as collateral. Most lenders allow you to borrow up to 80–85% of your home’s value minus your existing mortgage balance. For example, if your home is worth $500,000 and you owe $300,000, an 80% LTV lender would let you borrow up to $100,000 ($500,000 × 0.80 − $300,000). HELOCs typically have a 10-year draw period (where you can borrow and repay) followed by a 15–20-year repayment period. Interest rates are usually variable, tied to the prime rate plus a margin.
Cash-Out Refinance vs. HELOC
Both let you tap your equity, but they work very differently. A cash-out refinance replaces your entire existing mortgage with a new, larger loan and gives you the difference in cash. You get a single payment, often at a fixed rate, but you pay closing costs (typically 2–5% of the new loan). A HELOC is a second lien — your original mortgage stays untouched. HELOCs have lower upfront costs and flexible draws, but carry variable rates. Choose a cash-out refi when you want to lock in a lower rate on your entire mortgage or need a large lump sum. Choose a HELOC when you need flexible access to funds over time, want to keep your existing mortgage rate, or need a smaller amount.
How to Build Equity Faster
- Make extra principal payments — Even an extra $100/month on a $300,000 mortgage can cut years off your loan and save tens of thousands in interest
- Switch to biweekly payments — Paying half your mortgage every two weeks results in 13 full payments per year instead of 12
- Invest in value-adding improvements — Kitchen and bathroom remodels, energy-efficient upgrades, and curb appeal projects can increase your home’s appraised value
- Avoid cash-out refinancing for depreciating purchases — Tapping equity for a vacation or car converts long-term wealth into short-term spending
- Choose a shorter loan term — A 15-year mortgage builds equity dramatically faster than a 30-year because a much larger share of each payment goes to principal
- Monitor your home’s value — Request a PMI removal review when you believe your LTV has dropped below 80% due to market appreciation
Looking for related tools? Try our Mortgage Calculator to plan your loan payments and equity growth, or explore all Home & Real Estate tools.