EQUITYUPDATES / THE RESOURCE DESK
Understand your home equity
Start with value, debt, and the difference between owning equity and borrowing against it.
What Is Home Equity?
Home equity is the portion of your home you actually own — and it's one of the most powerful financial tools available to homeowners.
Equity = Value Minus What You Owe
When you own a home, your equity is the difference between what it's currently worth and what you still owe on your mortgage. As you make payments and as home values rise, that equity grows.
Think of equity as a savings account that grows in two ways: every mortgage payment you make reduces your loan balance, and when home values rise, your equity increases even without extra payments.
Most lenders allow you to borrow against up to 80–85% of your home's appraised value (minus what you already owe). So if your home is worth $500,000 and you owe $275,000, you may be able to access as much as $125,000–$150,000 in equity.
Important: Borrowing against your equity means using your home as collateral. Failure to repay can result in foreclosure, so it's essential to understand the product you choose before moving forward.