Quick Answer
Home equity is simply your home's value minus what you owe on it. If your house would sell for more than your remaining loan balance, that gap is your equity. It grows as you pay down your mortgage and as your home's value rises. A quick home valuation is the easiest way to estimate where you stand.
- Formula
- Market value minus what you owe
- Builds through
- Loan paydown and appreciation
- Ways to tap it
- HELOC, home equity loan, refinance, sale
- Ties to PMI
- More equity can remove PMI
- Biggest payoff
- Often realized when you sell
How Equity Is Built
Equity grows two ways. First, every mortgage payment chips away at your loan balance, so you owe a little less each month. Second, when local home values rise, your property may be worth more even before you've paid anything extra.
Improvements that add real value and a strong Central Indiana market can both move equity in your favor over time.
Equity and Mortgage Insurance
If you bought with a smaller down payment, you may be paying private mortgage insurance. As you build equity and reach a common threshold of about 20 percent, you can often request to have PMI removed, lowering your payment.
Watching your equity grow isn't just satisfying — it can put money back in your pocket.
Putting Equity to Work
Homeowners tap equity in several ways: a home equity line of credit, a home equity loan, or a cash-out refinance for goals like renovations. The largest payoff, though, usually comes when you sell and roll equity into your next home.
If you're weighing a move, knowing your equity helps you plan your next purchase. Reach out anytime to talk it through.
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Frequently Asked Questions — Home Equity
How do I calculate my home equity?
Estimate your home's current market value and subtract your remaining mortgage balance; the difference is your equity.
Can home equity go down?
Yes. If local home values fall or you borrow against the home, your equity can shrink, though paying down your loan works the other way.
Do I have to sell to use my equity?
No. Options like a HELOC, home equity loan, or cash-out refinance let you access equity without selling, though selling is often the simplest way.