How Much Equity Do I Have in My Home?
Your home equity is the difference between what your home is currently worth and what you still owe on loans secured by the property. The basic calculation is simple:
Estimated Home Value − Amount Owed = Estimated Home Equity
For example, if your home could reasonably sell for $350,000 and you owe $210,000 on your mortgage, you have approximately $140,000 in equity. The Consumer Financial Protection Bureau uses the same basic definition: equity is your property's current value minus the amount of an existing mortgage.
That gives you a useful starting point. But if you're asking because you're thinking about selling your home, there's another number that matters even more: how much money you might actually walk away with after the sale. Those two numbers are not necessarily the same.
How Do I Calculate My Home Equity?
Start with two pieces of information:
Your home's current market value
The total amount you owe against the home
Then subtract what you owe from the home's estimated value.
For example:
Estimated home value: $400,000
Mortgage balance: $235,000
Estimated equity: $165,000
If you also have a home equity loan or another loan secured by the property, include that balance too.
So, if the same homeowner had a $25,000 home equity loan:
$400,000 − $235,000 − $25,000 = $140,000 in estimated equity
This is an important distinction. Equity is based on the home's current value, not what you originally paid for it.
How Do I Know What My Home Is Worth?
This is usually the harder half of the equation.
You may know approximately what you owe because you can check your mortgage account. Determining what your home would realistically sell for requires more information.
Online home-value estimates can be useful for getting a rough idea, but they aren't the same as evaluating the property and current comparable sales. Property characteristics such as square footage, bedrooms and bathrooms, age, and sales of similar nearby homes can all factor into a valuation.
For homeowners in Cambridge, Isanti, North Branch, Braham, and surrounding East Central Minnesota communities, the details of the property can matter quite a bit. Two homes that appear similar at first glance may not be good comparisons once you account for condition, updates, lot size, location, outbuildings, acreage, or other property-specific features.
That is why I prefer to look at the actual property and relevant comparable sales rather than give a homeowner false confidence in a number pulled from an automated estimate.
A realistic market-value estimate gives you a much more useful equity calculation.
Your Mortgage Balance May Not Be Your Exact Payoff Amount
Here's where people can get tripped up: the balance you see when you log into your mortgage account may not be exactly what would need to be paid if you sold the house.
Your lender or mortgage servicer can provide an official payoff amount.
According to the Consumer Financial Protection Bureau, the payoff amount can differ from your current balance because it includes interest owed through the payoff date and may include other unpaid charges or applicable fees.
For an early estimate of your equity, your current loan balance is usually enough to get you started. When you're preparing for an actual sale and want a more precise estimate of your proceeds, the payoff amount becomes more important.
Home Equity Is Not the Same as What You Will Net From a Sale
This may be the most important distinction for a homeowner thinking about selling.
Equity tells you approximately how much of your home's value belongs to you after accounting for debt secured by the property.
Net proceeds are what you may have left after the sale itself is completed and applicable expenses are accounted for.
Imagine a homeowner in Cambridge has a home with an estimated market value of $375,000 and approximately $225,000 remaining on the mortgage.
Their estimated equity would be:
$375,000 − $225,000 = $150,000
But that does not mean the homeowner should automatically expect a $150,000 check at closing.
The eventual amount available to the seller can be affected by the actual sale price, mortgage payoff, other liens or loans secured by the property, transaction expenses, negotiated seller obligations, and other property- or transaction-specific costs.
This is why one of the questions I discuss with sellers early is what they hope to net from the sale, not simply what they think the house is worth. My seller materials also ask homeowners how much they owe on their current mortgage because that information is an important part of understanding the financial side of a possible sale.
If you're considering selling, a seller net sheet or estimated proceeds calculation is generally more useful for planning your next move than equity alone.
How Does Home Equity Grow?
There are two primary ways homeowners can build equity.
Paying Down Your Mortgage
Part of a typical mortgage payment goes toward principal and part goes toward interest. The principal portion reduces the amount you owe and therefore increases your equity.
Early in many mortgages, a larger share of the principal-and-interest payment goes toward interest. As the loan amortizes, the portion going toward principal generally increases.
This is why adding up all the mortgage payments you've made does not tell you how much equity you've built.
Changes in Your Home's Value
Equity can also increase if your home's market value rises.
For example, suppose you purchased a home for $275,000. Several years later, you owe $230,000, but comparable sales indicate the property may now be worth approximately $330,000.
Your estimated equity would be about:
$330,000 − $230,000 = $100,000
You didn't create all $100,000 simply by making mortgage payments. Some came from reducing the loan balance, while some may have resulted from an increase in the property's value.
The reverse can also happen. Home values can decline, which can reduce equity even while you're continuing to pay down your mortgage.
What People Often Get Wrong About Home Equity
One common mistake is assuming that purchase price + improvements = current home value.
It doesn't work that way.
If you bought a home for $250,000 and later spent $50,000 remodeling it, that does not automatically mean the home is now worth $300,000. Some improvements may influence market value more than others, and buyers may not assign dollar-for-dollar value to what you spent.
Another mistake is using the home's assessed value for property-tax purposes as though it automatically represents the price the property would bring on the open market. For an equity estimate related to selling, the relevant question is what the property could reasonably sell for under current market conditions.
And finally, don't confuse equity with cash in your bank account. Equity is wealth tied up in the property. To access it, homeowners generally need to sell the property or use a financial product that allows borrowing against it.
Why Knowing Your Equity Matters Before You Sell
If you're considering a move, your equity can affect several decisions.
It may help you understand how much money could potentially be available toward a down payment on another home, moving expenses, paying off other obligations, or simply retaining cash after the sale.
Amy's existing seller guide makes this same practical connection: equity built in a current home may become available through a sale and potentially help fund the purchase of the next home.
But I would not make plans for that money based solely on a rough online home value.
Before making a decision that depends on your sale proceeds, it makes sense to get a realistic estimate of your home's current market value, confirm the debts attached to the property, and estimate the expenses associated with selling.
Then you can work backward from a much more useful number: what you may actually have available after the sale.
Can I Use My Equity Without Selling My Home?
Potentially, yes.
Homeowners may have options such as a home equity loan, home equity line of credit (HELOC), or cash-out refinance. These products work differently and have different costs, rates, repayment structures, and qualification requirements.
A home equity loan generally provides a specific amount borrowed against the home's equity, while a HELOC provides a revolving line of credit secured by the home.
There is an important point to keep in mind: borrowing against your equity creates debt secured by your home. A HELOC, for example, can put the home at risk if the borrower cannot make the required payments.
If you're considering accessing equity without selling, talk with a qualified lender about the available options, costs, and qualification requirements. For broader financial or tax questions, consult the appropriate financial or tax professional.
Frequently Asked Questions
How much equity do I have in my home?
Subtract the total debt secured by your home from its current estimated market value. If your home is worth approximately $350,000 and you owe $200,000, you have roughly $150,000 in equity.
How can I find out what my home is currently worth?
A real estate professional can review recent comparable sales, your home's characteristics and condition, and relevant local market information to develop an estimated market value. An appraisal is another form of property valuation. Automated online estimates can provide a starting point, but they may not account fully for the individual characteristics of your property.
Is home equity the same as profit when I sell?
No. Your equity is essentially the difference between your home's value and the debt secured by it. Your actual net proceeds from a sale also depend on the final sale price, mortgage payoff and other liens, transaction expenses, and any other applicable costs or credits.
Can I have equity if I still have a mortgage?
Yes. Most homeowners with equity still have a mortgage. As you reduce the principal you owe, you generally build equity. Changes in the home's market value can also increase or decrease your equity.
Can I use my equity to buy another home?
Potentially. If you sell your current home, the proceeds remaining after mortgage payoff and applicable selling expenses may be available to put toward your next purchase. How much you can use—and how much you should use—depends on your particular finances and the next purchase, so it is worth discussing the numbers with your real estate professional and lender before making plans.
Start With the Right Numbers
If you're trying to figure out how much equity you have, start with a realistic estimate of your home's current market value and an accurate picture of what you owe.
If you're thinking about selling, take it one step further. Estimate what you could net after the sale. That is usually the number that helps you make practical decisions about what comes next.
I've been helping Minnesota buyers and sellers since 2001, and this is exactly the kind of question that's worth answering before you start making plans around a sale.
Let’s Talk
Amy Grafenstein, REALTOR®
RE/MAX Results
Call or Text: 612-363-0934
Email: [email protected]
Website: AmyGrafenstein.com
