Home Equity Calculator

Home equity is the portion of your home’s value that you actually own outright — the difference between what it’s worth and what you still owe on it. It grows through mortgage payments and property appreciation.

Basic Equity Formula:

Home Equity = Current Market Value − Outstanding Mortgage Balance

Loan-to-Value Ratio (LTV):

LTV = Outstanding Mortgage / Current Market Value × 100%

Lenders use LTV to determine borrowing eligibility. Most HELOCs and Home Equity Loans require LTV ≤ 85% (leaving 15%+ equity untouched).

Maximum Borrowable Equity:

Max HELOC/Loan = (Current Value × 0.85) − Outstanding Mortgage

Equity Growth Over Time:

After each mortgage payment: New Equity = Old Equity + Principal Paid + Appreciation

Worked Example:

• Original purchase: $320,000 (2019)

• Down payment: $64,000 (20%)

• Mortgage after 5 years: $240,000 principal paid down to $214,800

• Current market value (3%/yr appreciation): $320,000 × (1.03)^5 = $371,041

• Current Equity = $371,041 − $214,800 = $156,241

• LTV = $214,800 / $371,041 = 57.9% (well under 85%)

• Max HELOC = ($371,041 × 0.85) − $214,800 = $315,385 − $214,800 = $100,585

Uses of Home Equity: Renovation (adds value), debt consolidation, education, emergencies. HELOC interest is tax-deductible only when used for home improvement (IRS Publication 936). Treat equity like a savings account with strings attached — tapping it carelessly risks foreclosure.