Home Equity
Quick Answer
Home equity is the difference between your home's current market value and the outstanding balance on your mortgage.
Definition
Home equity is the difference between your home's current market value and the outstanding balance on your mortgage.
Explanation
Home equity represents the portion of your property you truly own. As you make mortgage payments and property values rise, your equity grows. Home equity can be tapped through home equity loans or lines of credit (HELOCs) for major expenses.
Having at least 20% equity often qualifies you for better refinancing rates and eliminates PMI requirements.
Example
A home worth $400,000 with a $250,000 mortgage has $150,000 in equity. If the market value rises to $450,000, equity grows to $200,000.
Frequently Asked Questions
What is Home Equity?
Home equity is the difference between your home's current market value and the outstanding balance on your mortgage.
How does Home Equity work?
Home equity represents the portion of your property you truly own. As you make mortgage payments and property values rise, your equity grows. Home equity can be tapped through home equity loans or lines of credit (HELOCs) for major expenses.Having at least 20% equity often qualifies you for better refinancing rates and eliminates PMI requirements.
Can you give an example of Home Equity?
A home worth $400,000 with a $250,000 mortgage has $150,000 in equity. If the market value rises to $450,000, equity grows to $200,000.
Free Excel Templates
Also try our free Mortgage Amortization Schedule template
Create a detailed mortgage amortization schedule. See exactly how much principal and interest you pay each month over the loan term.
Download Mortgage Amortization ScheduleAlso try our free Net Worth Tracker template
Calculate and track your net worth across assets and liabilities. Monitor growth over time with historical tracking and charts.
Download Net Worth Tracker