INDEPENDENT HOMEOWNER EDUCATIONFOR THE PLACE YOU CALL HOME.
HOMEHOME EQUITY / THE BASICS

Know what you own.

A home is a place to live. Equity is a financial position. Here’s how the two fit together.

ESTIMATED HOME VALUE$350,000
−
ALL HOME-SECURED DEBT$200,000
=
ESTIMATED EQUITY$150,000

An example, not a valuation. Equity changes as your home’s value and loan balances change.

01 / THE FOUNDATION

Equity is value.
It isn’t cash in hand.

Your equity is the difference between what your home might sell for and the balances of loans secured by it. That includes your first mortgage and any other home equity borrowing.

Turning equity into cash generally means selling or borrowing. Selling brings transaction costs; borrowing brings payments, fees, and risk to your home. The headline equity number is not the amount you can automatically withdraw.

02 / THE MOVING PARTS

Two things change
the picture.

Paying down loan principal reduces what you owe. Changes in market value affect what your property may be worth. Interest payments alone do not reduce principal, and rising home prices are never guaranteed.

A renovation can improve how you live without adding its full cost to your home’s value. Use recent comparable sales as a starting point; a lender may require its own valuation.

A number to know: CLTV.

Combined loan-to-value is all debt secured by the home divided by its value. In the example above, $200,000 ÷ $350,000 is about 57%. A lender’s permitted limit is only one part of its decision; income, credit, costs, and property requirements also matter.

Try the equity calculator ↗

Before you make a move.

  1. Collect your balances. Include every loan secured by your property, not just the first mortgage.
  2. Use a realistic value. Compare similar nearby homes that actually sold, rather than asking prices alone.
  3. Keep a cushion. Consider repairs, emergencies, and a potential decline in value.
  4. Choose a question before a product. Define what you need, what it costs, and how you would repay it.
Next up: compare the paths ↗