Home equity is one of the biggest financial assets most families have, and it's often bigger than people expect. Here's what equity is, how to estimate yours, and what you can do with it.
What is home equity?
Equity is the part of your home you actually own. It's your home's current market value minus everything you still owe on it, including your mortgage and any home equity loan or line of credit.
Home value − loan balances = your equity
A quick example
Your home is worth about $450,000
You owe $280,000 on your mortgage
Your equity is $170,000, or about 38% of the home's value
How your equity grows
Paying down your loan. Part of every mortgage payment goes to principal, and that part becomes equity.
Appreciation. When homes around you sell for more, your home's value usually rises too.
Improvements. Some updates add value, though rarely dollar for dollar. See my guide to the best updates before selling.
Equity vs. what you'd actually walk away with
If you sell, your equity isn't the same as the check you get at closing. Selling costs come out first, such as agent compensation, Georgia's transfer tax ($1 per $1,000 of the sale price), the attorney's closing fees and any repairs or credits you agree to.
Using the example above: if selling costs came to $36,000, you'd walk away with about $134,000 before taxes. Your real numbers depend on your price and your agreement, so I prepare a seller net sheet for every client before listing.
How to estimate your own equity
Find your loan balance. It's on your latest mortgage statement or your lender's app. Add any home equity loan or line.
Get a realistic home value. Online estimates can be off by tens of thousands. A local market analysis based on recent nearby sales is far more accurate. Request your free home value here.
Subtract. Value minus what you owe is your estimated equity.
What can you do with your equity?
Move up or downsize. Equity from your current home can become the down payment on your next one.
Borrow against it. A home equity loan, home equity line of credit (HELOC) or cash-out refinance can fund renovations or other big expenses. Lenders typically limit how much of your value you can borrow against.
Drop mortgage insurance. If you put less than 20% down on a conventional loan, reaching 20% equity may let you ask your lender to remove PMI.
Keep building it. Doing nothing is a fine choice too. Equity keeps growing as you pay down your loan.
Want to know your number?
I'll put together a free, no-pressure home value report using recent sales in your neighborhood, so you know your equity and your options. Get your free home value or reach out to me.
This article is general information, not financial or tax advice. Talk with your lender or a financial professional about borrowing against your home.
