What Is Home Equity?
Home Equity: The value of your home minus what you owe on it.
Home equity is the share of your home you own outright: the current value minus your loan balance.
How it grows
- Your down payment is your starting equity
- Each payment reduces the principal through amortization
- Home values rising over time
- Improvements that add value
Example
A home worth $450,000 with a $330,000 balance has $120,000 of equity, or about 27%.
Using equity
- Remove PMI once you reach 20%
- Borrow against it with a cash-out refinance or HELOC
- Use it toward your next down payment when you sell