How Much Equity Do I Have in My Home? Calculator + Guide

What Is Home Equity and How Does It Work?

Home equity is the portion of your home that you actually own, free and clear. It is the difference between your property's current fair market value and the total amount you still owe on your mortgage (and any other liens). If your home is worth $400,000 and you owe $280,000 on your loan, you have $120,000 in equity.

For the majority of American homeowners, equity represents the single largest component of their net worth. According to Federal Reserve data, total owners' equity in residential real estate reached approximately $34.4 trillion by the third quarter of 2025. The average homeowner with a mortgage holds roughly $299,000 in equity, according to Cotality (formerly CoreLogic). That figure has pulled back slightly from a peak near $311,000 in mid-2024 as national home price growth has moderated, but it remains extraordinarily strong by historical standards.

Your equity is not a static number. It changes constantly based on two forces: how quickly you are paying down your loan principal and what is happening to property values in your area. Understanding both forces is critical before you make any decision about selling, borrowing, or simply waiting.

How to Calculate Your Home Equity Step by Step

The formula itself is simple. Applying it accurately requires good data:

Step 1: Determine your home's current value. You can start with an online estimate from Zillow, Redfin, or your county assessor, but these automated valuations can miss condition issues, recent renovations, and hyper-local trends. For a more reliable figure, ask a local real estate agent for a comparative market analysis (CMA), or hire a licensed appraiser. Appraisals typically cost $300 to $500 and carry the most weight with lenders.

Step 2: Find your remaining loan balance. Check your most recent mortgage statement or log into your servicer's portal. Look specifically for your "payoff amount," not just your statement balance. The payoff figure accounts for accrued interest through the expected date of repayment and may also include a prepayment penalty if applicable.

Step 3: Subtract. The difference is your equity. If you owe more than your home is worth, you are in "negative equity" or "underwater." As of Q4 2025, roughly 44.6% of mortgaged homes were "equity rich" (meaning the owner owed less than half the property's market value), while negative equity cases remained near historic lows, according to ATTOM.

How Equity Builds Over Time: The Two Engines of Growth

Think of equity growth as being powered by two distinct engines that operate simultaneously. One you control directly; the other depends on market conditions.

Engine 1: Mortgage Principal Paydown

Every monthly mortgage payment you make is divided between interest and principal. In the early years of a 30-year loan, the split is heavily weighted toward interest. For example, on a $360,000 loan at 6.5%, your first monthly payment of $2,275 allocates roughly $1,950 to interest and only $325 to principal. That ratio gradually shifts through amortization: by year 10, nearly $500 of each payment reduces principal, and by year 20 the principal portion exceeds $900.

This is why homeowners who have held their mortgage for 10 or more years often have significantly more equity than they realize. Their early payments felt like they were going nowhere, but the compounding effect of amortization accelerates meaningfully over time. Any additional principal payments you make (even an extra $100 per month) can compress this timeline considerably.

Engine 2: Home Price Appreciation

When your home increases in value, your equity grows without any additional payment on your part. The FHFA House Price Index shows that U.S. home prices rose 1.9% from November 2024 to November 2025, a notable cooldown from the 4.5% annual rate recorded over the same period a year earlier. Despite the slower pace, home prices have appreciated in every quarter since 2012 at the national level.

The critical caveat is that appreciation varies dramatically by location. The FHFA's most recent quarterly report (Q3 2025) found that while the Middle Atlantic division posted 5.7% annual appreciation, the Pacific division was essentially flat with a 0.1% decline. Individual metro areas ranged from a 9.7% gain (Allentown-Bethlehem-Easton, PA) to a 10.8% decline (Cape Coral-Fort Myers, FL). Where you live matters enormously.

How Much Equity Do I Have? A Realistic Example

Let's walk through a concrete scenario. Suppose you purchased a home for $350,000 in February 2021 with a 30-year fixed mortgage at 3.0% and 10% down ($35,000). Your original loan amount was $315,000.

Five years later, the FHFA national index shows cumulative appreciation of approximately 28% from early 2021 through early 2026 (driven by rapid gains in 2021 and 2022, followed by slower growth). That would place your home's estimated value near $448,000.

Meanwhile, five years of payments on your 3.0% mortgage have reduced your loan balance from $315,000 to approximately $282,500. Your equity calculation:

You started with $35,000 in equity from your down payment. Five years later, you have $165,500. Of that $130,500 gain, roughly $97,500 came from appreciation and $32,500 from principal paydown. This illustrates why the pandemic-era housing boom created such an extraordinary wealth effect: homeowners who bought with relatively small down payments saw their equity multiply several times over in just a few years.

However, equity on paper is not the same as cash in hand. To access it, you need to either sell or borrow against it, and each path involves trade-offs that deserve careful analysis.

The Mortgage Lock-In Effect: Equity Rich, Cash Poor

One of the defining dynamics of today's housing market is the "lock-in effect." Millions of homeowners who secured mortgage rates between 2% and 4% during 2020 and 2021 are sitting on substantial equity but feel financially stuck. Moving to a new home would mean taking on a mortgage at 6% or higher, potentially doubling their monthly payment.

According to an FHFA study, each percentage point of rate differential reduces a homeowner's probability of selling by approximately 18%. With roughly 80% of current mortgage holders sitting on rates below 6%, the financial incentive to stay put remains powerful. Even as rates have eased from their 2023 peak of nearly 8% to approximately 6.0% as of mid-February 2026 (per Freddie Mac's Primary Mortgage Market Survey), the gap between locked-in rates and prevailing rates continues to suppress housing turnover.

There are signs the effect is beginning to loosen. The share of borrowers with sub-3% mortgages has dropped from 24.6% in early 2021 to roughly 20%, as more homeowners refinanced, sold, or originated new loans at higher rates. By early 2026, the share of mortgage holders above 6% is approaching parity with those below 3%, which suggests the "payment penalty" of moving is gradually shrinking for a growing portion of the market.

For homeowners caught in this dynamic, the question becomes: is it smarter to sell and deploy your equity elsewhere, or borrow against it while preserving your low rate? The answer depends on your financial goals, local market conditions, and how long you plan to stay.

Your Options for Accessing Home Equity

Once you know how much equity you have, you have four primary ways to put it to use. Each comes with distinct costs, risks, and benefits. Here is a clear comparison based on current market conditions as of February 2026.

Option 1: Sell Your Home

Selling converts all of your equity to cash (minus transaction costs). For most homeowners, closing costs on a sale total 7% to 10% of the sale price, including agent commissions, title insurance, transfer taxes, and miscellaneous fees. On a $435,000 sale, that leaves you with roughly $400,000 to $405,000 before your mortgage payoff.

Selling makes the most sense when you need to relocate for work or life reasons, when your home no longer fits your needs, when local market conditions favor sellers, or when you can redeploy the equity into a lower-cost market. A top agent's negotiation skills can meaningfully affect your net proceeds; even a 1% difference in sale-to-list ratio on a $435,000 home represents $4,350. This is why choosing a listing agent based on performance data rather than name recognition matters.

Option 2: Home Equity Line of Credit (HELOC)

A HELOC lets you borrow against your equity as needed, up to a set limit (typically 80% to 85% of your home's value minus your existing mortgage). As of February 2026, average HELOC rates are approximately 7.1% to 7.3%, with introductory rates as low as 2% to 5% available from some lenders. HELOCs carry variable rates tied to the prime rate (currently 6.75%), so your payment fluctuates over time.

A HELOC is often the preferred choice for homeowners who want to keep their low primary mortgage rate while accessing smaller or intermittent amounts of capital, such as for home renovations or consolidating higher-interest debt. The drawback is rate uncertainty: if the Fed pauses or reverses course on rate cuts, your borrowing costs could increase.

Option 3: Home Equity Loan

Unlike a HELOC, a home equity loan provides a lump sum at a fixed interest rate with a set repayment schedule. Current average rates hover around 7.0% to 8.0% depending on term length and creditworthiness. Because the rate is fixed, your monthly payment stays predictable for the entire loan term.

This option works well for homeowners who need a specific amount for a one-time expense (a major renovation, for example) and prefer the certainty of knowing their exact payment. Just remember: like a HELOC, your home serves as collateral, so failure to repay could result in foreclosure.

Option 4: Cash-Out Refinance

A cash-out refinance replaces your existing mortgage with a new, larger one. You receive the difference in cash. Average cash-out refinance rates are running around 6.4% to 6.5% as of February 2026.

This option makes the most financial sense if your current mortgage rate is already near or above prevailing rates (say, 6.5% or higher). In that scenario, you consolidate everything into one payment without a meaningful rate penalty. For homeowners locked in at 3% to 4%, a cash-out refi usually does not make sense because it would require surrendering a historically favorable rate. The closing costs are also significant, typically 2% to 5% of the new loan amount.

Why Many Homeowners Underestimate (or Overestimate) Their Equity

One of the most common mistakes is relying solely on automated home value estimates. Zillow's Zestimate, Redfin's estimate, and similar tools use algorithms based on public records and comparable sales, but they cannot account for your home's specific condition, upgrades, or location nuances. These estimates can be off by 5% or more in either direction, which on a $400,000 home represents a $20,000 swing in your perceived equity.

On the mortgage side, homeowners sometimes confuse their statement balance with their payoff amount. These figures can differ by hundreds or even thousands of dollars due to accrued interest, escrow adjustments, and potential prepayment penalties. Always request a formal payoff quote from your servicer when calculating your equity for decision-making purposes.

Homeowners also frequently overlook the impact of depreciation in softening markets. While national data shows consistent price gains since 2012, individual markets can and do decline. Several Florida metros, for instance, have experienced year-over-year price drops in 2025 due to rising insurance costs, inventory surges, and affordability ceilings. If you purchased near a market peak in one of these areas, your equity may be lower than you expect.

Conversely, homeowners who have made significant improvements often undervalue their property. A well-executed kitchen renovation or strategic staging can add measurable value that automated estimates miss entirely.

How Home Equity Fits Into Your Decision to Sell

Understanding your equity is the first step, but it is not the whole picture. Selling costs reduce your take-home equity by a significant amount. Agent commissions alone can range from 5% to 6% of the sale price, and additional closing costs (title insurance, transfer taxes, repairs, staging) add another 1.5% to 3%.

For a $435,000 home with $99,000 in equity, closing costs of 8% ($34,800) would leave you with roughly $64,200 in net proceeds. That number is the one that matters when you are evaluating whether selling makes financial sense.

The question to ask is not simply "how much equity do I have?" but rather "what can I do with my net proceeds that improves my financial position?" For some homeowners, that means purchasing in a lower-cost market and pocketing the difference. For others, it means downsizing and eliminating a mortgage entirely. And for a growing number of equity-rich, rate-locked homeowners, the answer is that selling does not make sense right now, and borrowing against equity is the smarter move.

If you are weighing these options, a conversation with a data-driven local agent can help you understand what your home would realistically sell for, what your net proceeds would look like after all costs, and whether current market timing favors sellers in your specific area.

Frequently Asked Questions About Home Equity