About Home Equity
Equity is ownership you've accumulated two ways — principal payments and price appreciation — and it's most households' largest asset. Borrowing against it is cheaper than any unsecured credit precisely because the house itself backs the debt, which is both the feature and the warning.
Enter your home's realistic market value (recent comparable sales beat wishful listings), the mortgage balance, and the lender's LTV cap. You get total equity, your current LTV, and the borrowable figure — the number a home-equity loan or HELOC application will actually orbit.
Replacing the whole mortgage rather than borrowing on top? That's the Refinance Calculator.
The LTV Math
Two subtractions, one cap:
Total equity = home value − mortgage balance Available = value × LTV cap − mortgage balance Current LTV = balance ÷ value
Worked example: $400,000 home, $220,000 owed → $180,000 total equity at 55% LTV. An 80%-cap lender allows combined debt of $320,000, so $100,000 is borrowable. At a 90% cap the figure rises to $140,000 — and so does the risk stack.
Equity vs Borrowable
A $400,000 home at different payoff stages (80% cap) — computed by this calculator:
| Mortgage balance | Total equity | Current LTV | Borrowable (80%) |
|---|---|---|---|
| $360,000 | $40,000 | 90% | $0 — above the cap |
| $320,000 | $80,000 | 80% | $0 — at the cap |
| $280,000 | $120,000 | 70% | $40,000 |
| $220,000 | $180,000 | 55% | $100,000 |
| $120,000 | $280,000 | 30% | $200,000 |
| $0 (paid off) | $400,000 | 0% | $320,000 |
The top rows explain post-purchase disappointment: young mortgages sit near the cap, so 'all that equity' is real but locked until principal falls or value rises.
Loan vs HELOC, and the Collateral Truth
Two vehicles for the same equity: a home-equity loan delivers a lump sum at a fixed rate and payment (right for one-time known costs — a renovation bid, consolidation), while a HELOC opens a variable-rate credit line you draw as needed (right for staged projects and standby liquidity), typically with a draw decade before repayment begins. Rates run above first mortgages, far below unsecured debt.
The sentence that belongs in bold: either product makes your home the collateral — default risks foreclosure, which is a different universe from defaulting on a credit card. Equity borrowing for appreciating purposes (renovations, consolidation with the cards then closed) has logic; equity into vacations and vehicles converts your house into consumption. And falling home prices can trap borrowers above the cap — 2008's signature injury.