What Is Home Equity?

Home equity is the portion of your home’s value that you actually own — calculated by subtracting your remaining mortgage balance from the property’s current market value. It grows as you pay down your loan and as your home appreciates.

If your home is worth $400,000 and you owe $250,000, you have $150,000 in equity. You can access that equity through a cash-out refinance, home equity loan, or home equity line of credit (HELOC). Most lenders let you borrow up to 80%–85% of your home’s value minus your current balance. In this example, 80% of $400,000 is $320,000, minus your $250,000 balance, giving you up to $70,000 in accessible equity.

Key Facts

• Formula: Current market value − remaining mortgage balance = home equity
• How it grows: Through monthly principal payments and property value appreciation
• Tappable equity: Most lenders allow borrowing up to 80%–85% of home value minus your loan balance
• Cash-out refinance: Replaces your existing mortgage with a larger one, giving you the difference in cash
• HELOC: A revolving credit line secured by your equity, often with variable rates
• Average U.S. equity: Homeowners held an average of roughly $300,000+ in equity as of 2025

Frequently Asked Questions

How do I build equity faster?

Make extra principal payments, choose a 15-year mortgage instead of 30, or invest in improvements that increase your home’s value. Even one additional payment per year on a 30-year loan can shave 4–5 years off your term and build equity significantly faster.

Can I use home equity to buy another property?

Yes. A cash-out refinance or HELOC can provide funds for a down payment on a second home or investment property. Lenders will evaluate your combined DTI and reserves to qualify you for the additional loan.

When can I access my equity?

There is no mandatory waiting period for a HELOC, though many lenders prefer you to have owned the home for at least 6–12 months. Cash-out refinances typically require at least 6 months of ownership and seasoning on your current mortgage.