Home Equity
Definition
Home equity is the portion of your property you actually own: the current market value minus everything still owed against it.
How it works
Equity grows in two ways. Each mortgage payment retires a little principal, and property values may rise over time. A home worth $900,000 with a $500,000 mortgage carries $400,000 of equity.
Equity on paper is not the same as equity you can borrow. Lenders will typically let you access up to 80% of the appraised value through a refinance, so on that same $900,000 home the ceiling is $720,000 in total borrowing — meaning about $220,000 could be accessible, not the full $400,000.
Accessing equity is usually done through a refinance, a home equity line of credit, or a second mortgage. Each has different costs, rates, and repayment rules, and the right choice depends on whether you need a lump sum or ongoing flexibility.
Quick facts
- Equity = market value minus total debt secured on the home.
- Most lenders cap accessible borrowing at 80% of value.
- Access methods: refinance, HELOC, or second mortgage.
Put this into practice
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