Home Values & Pricing
How much equity do I have in my home?
By Steve Lockhart
The short answer
Equity is one of the cleanest numbers in personal finance: what the asset is worth, minus the debt standing against it. In plain terms, it is the amount you would take home from a sale after you paid off every claim on the house.
Full answer
Equity is one of the cleanest numbers in personal finance: what the asset is worth, minus the debt standing against it. In plain terms, it is the amount you would take home from a sale after you paid off every claim on the house.
The formula never changes: market value minus total debt. The first side is the one to get right. Today's value comes from current sales in your area, not from a wish, not from the county's assessment, and not from a website's broad band. The second side means every balance tied to the property: your first mortgage, any second mortgage or home equity line, and any outstanding judgments or liens recorded. Between the two numbers and ordinary arithmetic, you have your answer.
Equity matters because it holds your options. It decides how much you can borrow in a refinance, whether private mortgage insurance applies, what you can put toward the next home, and what the lender sees as your stake in the property. It is also the cushion that keeps a simple dip in the market from pulling your loan underwater, and the pressure of that cushion is one you will feel during the parts of the cycle where sentiment turns.
A common guess is that equity grows only from the payments you make. In fact it grows from two directions at once: your payments reduce the debt, and the market raises the value. For most owners the movement of the market does more than the schedule of the loan. A home bought a decade ago in the same grid can carry a very different equity number today, through no effort of its own.
The honest action is to pencil it: a current CMA, the net sheets from the lender, and a simple page that ends with one number. Whether you plan a move, a refinance, or a standstill, the correct number in hand is worth more than the guess in the head.
Go a little deeper
Frequently asked
Questions homeowners often follow up on
What is a good amount of equity to have?
The useful benchmark is what gives you choices: more than 20 percent lets most lenders extend credit without mortgage insurance, and a cushioned feels even better when the market dips. The right amount depends on your plans, so match the equity to what you intend to do.
Can I use equity before I sell?
Yes, through a home equity line, a cash out refinance, or a home equity loan, each of which turns your ownership into a lower secured by the house. The lender charges for that access through interest and fees, so the reason should justify the cost.
Is my equity the same as savings?
It is real wealth, but it is not cash in a self. Until you sell or borrow against it, the equity is tied to the house and it moves with the market. Treat it as long term wealth and a powerful lever, and keep a separate, liquid cushion for the day to day.
The Lockhart Method
The Lockhart Method
Your Home | My Strategy | Proven Results
My strategy: measure the wealth the way the bank and the title are found. I build your value from current sales, line up every commitment attached to the title, and hand you the real number in one page. Then we plan the use: the next home, the refinance, or the steady liquid seat. The equity is a tool, you are the one holding it.
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