How Much Equity Do I Have in My Home? (How to Calculate It Right)
The formula is simple enough that it feels like a solved problem. What your home is worth, minus what you owe. Two numbers, one subtraction, done.
Then people plan around the answer — a renovation, a second home, a retirement and find out at a lender's desk or a settlement table that the real number was tens of thousands lower. Not because the maths was wrong, but because both inputs were, and because "equity" turns out to be three different numbers wearing the same name. Here is how to get it right, from us as Northern Virginia real estate agents who list homes for a 1.5% full-service listing fee.
Quick Answer: Home equity is your home's current market value minus everything secured against it. The formula is easy. Getting the two inputs right is where people lose money.
Do not use your Zestimate as market value. Zillow publishes the number itself: the nationwide median error rate for off-market homes is about 7%, versus roughly 1.8% for homes actively listed. On a $700,000 house that is around $49,000 — and "median" means half of homes are worse.
Do not use your mortgage balance. You need the payoff figure, which includes interest accrued to the settlement date and any release fees. And check for a second lien you have forgotten.
Then the part almost nobody gets: you have three different equity numbers. Total equity, usable equity a lender will lend against (capped near 80–85% CLTV), and net proceeds if you sell. On the same house they can differ by six figures.
Key Takeaways
- Equity = market value − what is secured against the home. The formula is not the hard part.
- Your Zestimate is off-market, and Zillow's own published median error for off-market homes is about 7%.
- Payoff is not balance. Interest accrues daily, and the payoff quote is only good until a stated date.
- Three numbers, one house: total equity, usable equity, and net proceeds. Never quote the first and plan the third.
- Lenders cap borrowing near 80–85% CLTV, so usable equity is always less than total equity.
- Selling costs come out of proceeds, and the listing fee is the largest one you control.
- Escrow comes back to you — one of the few surprises in your favour.
On This Page
- The formula, and why it is the easy part
- The three numbers everyone calls "equity"
- Work out your three numbers
- Input one: what your home is actually worth
- Input two: what you actually owe
- Usable equity and the CLTV ceiling
- Net proceeds: what you would really walk away with
- One house, three answers
- Equity after 1, 3 or 10 years
- Equity percentage and "75% equity"
- If your house is paid off
- Seven ways people get this wrong
- Why the right number matters
- Frequently asked questions
- Glossary
The Formula, and Why It Is the Easy Part
Here is the whole thing.
Home Equity
Current market value−Everything secured against the home=Your equity
Two inputs. Both are harder to pin down than they look, and both are usually wrong.
Nobody struggles with the subtraction. What goes wrong is that people plug in a number from a website for the first input, a number from an app for the second, and treat the result as a fact about their life.
It is not a fact. It is an estimate built on two estimates, and the error bars on both are wider than most homeowners imagine. Worse, the answer it produces is not the number you actually need for whatever you are planning, which is the part we will come to next.
The Three Numbers Everyone Calls "Equity"
This is the most useful idea in this article, so we will put it up front.
When someone says "I have $300,000 of equity," they mean one specific number. When they then say "so I can pull out $300,000" or "so I will walk away with $300,000," they have silently swapped it for a different one. All three exist. They are rarely the same.
The same $700,000 home, with $400,000 still owed:
Same house. Same day. Same mortgage. $300,000, $195,000, or $265,000, depending entirely on what you actually meant.
Which one do you need? If you are borrowing, you need number two, and number one will disappoint you by about a hundred grand. If you are selling and buying something else, you need number three, because that is what funds the next deposit. Number one is the one on every website and the one nobody can actually use for anything.
We will build each of these properly below, then put them side by side in a worked example. But first, the two inputs, because if those are wrong then all three numbers are wrong together.
Work Out Your Three Numbers
Rather than make you do this on paper, pick the two closest figures below. The calculator shows all three of your numbers at once, which is the whole point.
Interactive · Home Equity Calculator
How much equity do you actually have?
Pick the closest figures. All three of your equity numbers update together.
1. What is your home worth?
2. What do you still owe on it?
Illustrative only, not a valuation, quote or lending decision. Usable equity assumes an 85% CLTV ceiling; your lender may cap at 80% or lower, and equity alone does not qualify you. Net proceeds assume our 1.5% listing fee, an example 2.5% buyer-agent figure you may choose not to offer, and a 1% placeholder for other costs; real costs vary by jurisdiction and transaction. All commissions are negotiable and not set by law.
Notice what moves and what does not. Paying down your mortgage lifts all three numbers by roughly the same amount. Your home gaining value lifts total equity by the full amount but usable equity by only about 85% of it, and net proceeds by less again, because the cost of selling scales with the price.
Input One: What Your Home Is Actually Worth
Your home is worth what a buyer will pay for it. Everything else is an approximation of that, and the approximations vary enormously in quality.
Why your Zestimate is not this number
We are not going to tell you Zestimates are useless, because they are not. We are going to tell you what Zillow itself publishes about them, which is more damning than anything we would say.
Zillow's own figures. The nationwide median error rate for the Zestimate is around 1.8% for on-market homes and around 7% for off-market homes. Your home, sitting quietly with no listing on it, is an off-market home. And median error means exactly what it sounds like: half of all homes are off by more than that.
On a $700,000 house, roughly 7% is about $49,000. That is the coin-flip case. Zillow's own accuracy pages note that nearly 70% of on-market Zestimates land within 5% of the sale price and nearly 90% within 10% — which also means around one in ten is off by more than 10%, and those are the good on-market numbers.
There is a subtlety in the methodology worth understanding, because it explains the gap. Zillow measures accuracy against the most recent Zestimate before a sale. When a home is listed, the Zestimate moves toward the list price. So the flattering on-market figure is partly measuring a number that has already been told the answer. The off-market number — the one describing your house right now — has no such help.
What to use instead
| Source | What it is good for | What it is not |
|---|---|---|
| Automated estimate (Zestimate and similar) | A rough starting bracket, tracking direction over time | A number to borrow or plan against |
| Tax assessment | Understanding your tax bill | Market value. It is a mass-appraisal figure on its own cycle and can be far off in either direction. |
| Agent CMA | A real read on your specific home from recent nearby sales | Binding on a lender |
| Licensed appraisal | What a lender will actually rely on | Free, or instant |
| An actual accepted offer | The only true answer | Available before you list |
The gap between an automated estimate and an appraisal is not academic. It is exactly the gap that surfaces when a lender's appraiser disagrees with a contract price, and our guide to the appraisal gap and how buyers and sellers handle low appraisals covers what happens when the professional number comes in under the number everyone had assumed.
Input Two: What You Actually Owe
This one feels like it should be exact. It is a number in your banking app. It is not the number you need.
Balance is not payoff
Your balance is what you owed as of the last statement. Your payoff is what it takes to actually extinguish the loan on a specific future date, and it is bigger. It includes:
- Interest accrued since your last payment, calculated per day. Mortgage interest is paid in arrears, so there is always some accrued.
- Interest to the payoff date, not to today. A payoff quote is good until a stated date and rises daily after it.
- Any recording or release fees to get the lien off the title.
- Any prepayment penalty, rare on modern residential loans but not extinct. Check.
The difference is usually hundreds to a couple of thousand rather than tens of thousands. It matters most when you are close to the line on a refinance or trying to clear a specific number at settlement.
The lien you forgot
Everything secured against the house counts, not just the mortgage. The HELOC you opened during the refinance boom and never drew on still registers a lien. The solar loan. A contractor's financing arrangement. A second mortgage. A tax lien. An old judgment. Equity is value minus all of it, and the title search will find every one of them whether you remembered or not.
An undrawn HELOC is the classic. Homeowners genuinely forget them because the balance is zero and nothing appears on any statement. It still occupies the space in your CLTV calculation, and it still has to be dealt with at settlement.
The fix takes ten minutes: pull your title or a recent title report and read what is actually recorded against your property. Not what you remember. What is recorded.
Usable Equity and the CLTV Ceiling
Here is why "I have $300,000 of equity" and "I can borrow $300,000" are different sentences.
Lenders will not let you borrow to 100% of your home's value. They keep a cushion, because they are the ones exposed if values fall. That cushion is expressed as combined loan-to-value, or CLTV: everything secured against the home, divided by the home's value.
Per the Consumer Financial Protection Bureau, most lenders cap CLTV at 80% to 85% of appraised value. Some, particularly credit unions, will go to 90% for borrowers with strong credit and income. So:
Usable Equity
(Value × lender's max CLTV)−What you owe=What you can borrow
Most lenders cap CLTV at 80–85%. Some reach 90%. None reach 100%.
On our $700,000 house with $400,000 owed:
- At 80% CLTV: $560,000 − $400,000 = $160,000
- At 85% CLTV: $595,000 − $400,000 = $195,000
- At 90% CLTV: $630,000 − $400,000 = $230,000
Total equity says $300,000. Reality says $160,000 to $230,000 depending on the lender, and that spread is worth shopping for. Which lender, which product, and which ceiling are the whole game here, and our breakdown of home equity loan rates, LTV and the application process walks through what lenders actually look at.
CLTV is not the only gate. Equity gets you in the room. Credit score and debt-to-income decide whether you leave with anything. Typical expectations run around a 680-plus score and DTI under 43%, though this varies by lender and product. You can be equity-rich and still be declined.
There is also a product question hiding inside this. A lump-sum home equity loan and a revolving line of credit behave very differently, and the right one depends on whether you know your number. Our comparison of a HELOC versus a home equity loan covers which suits which situation.
Net Proceeds: What You Would Really Walk Away With
If your plan involves selling, this is your number, and it is the one people are most wrong about — because total equity ignores the cost of turning a house into money.
Net Proceeds
Sale price−Loan payoffs−Cost of selling=What you keep
Plus your escrow balance back, which is the one item that moves in your favour.
What comes out, roughly in order of size:
- Listing commission. Negotiable, and the largest line you control. Ours is 1.5%.
- Buyer-agent compensation, if you choose to offer it. Optional and negotiable.
- Transfer and recordation taxes, which vary enormously across the DMV and are not uniform even within a single state.
- Settlement, title and recording fees.
- Repairs or credits negotiated after inspection.
- Prorations for property tax and, if applicable, HOA dues.
And the item that goes the other way: your escrow balance comes back to you. If your lender has been collecting for taxes and insurance, whatever sits in that account is yours once the loan is paid off, typically refunded within a few weeks of settlement. It is not part of your equity calculation, but it is part of your cash, and people routinely forget it exists.
Because the cost side varies so much by jurisdiction, the only honest way to do this is line by line for your actual address. Our seller net sheet itemises every cost between sale price and final proceeds.
Then go through it properly. Our breakdown of home sale fees and commissions explains which of those costs are fixed, which are negotiable, and which you can remove entirely — because a surprising number of sellers pay for things they were never obliged to.
Seller Savings Calculator
How much more do you keep with our 1.5% listing fee?
Select your home's estimated value to see your net proceeds, side by side.
At a 3% Listing Fee
Our Fee, Only 1.5%
Extra in your pocket
$6,000
Compared with a 3% listing fee, with no reduction in service or marketing.
At a 3% Listing Fee
Our Fee, Only 1.5%
Extra in your pocket
$8,250
Compared with a 3% listing fee, with no reduction in service or marketing.
At a 3% Listing Fee
Our Fee, Only 1.5%
Extra in your pocket
$10,500
Compared with a 3% listing fee, with no reduction in service or marketing.
At a 3% Listing Fee
Our Fee, Only 1.5%
Extra in your pocket
$12,750
Compared with a 3% listing fee, with no reduction in service or marketing.
At a 3% Listing Fee
Our Fee, Only 1.5%
Extra in your pocket
$16,500
Compared with a 3% listing fee, with no reduction in service or marketing.
One House, Three Answers
Let us put it together. A $700,000 home. A $400,000 mortgage payoff. Nothing exotic.
| Question you are asking | Calculation | Answer |
|---|---|---|
| "How much equity do I have?" | $700,000 − $400,000 | $300,000 |
| "How much can I borrow?" (85% CLTV) | ($700,000 × 0.85) − $400,000 | $195,000 |
| "How much can I borrow?" (80% CLTV) | ($700,000 × 0.80) − $400,000 | $160,000 |
| "What do I walk away with?" (1.5% listing fee) | $700,000 − $400,000 − $10,500 − $17,500 − $7,000 | $265,000 |
| "What do I walk away with?" (3% listing fee) | $700,000 − $400,000 − $21,000 − $17,500 − $7,000 | $254,500 |
Read the spread. The honest answers to "how much equity do I have" on this one house range from $160,000 to $300,000, a gap of $140,000, and every number in that range is correct for some question.
Note the last two rows. Same house, same buyer, same day. The only difference is the listing fee, and it moves what you keep by $10,500. That is the one line in this entire article that is purely your decision. Everything else is arithmetic, a lender's policy, or a tax code.
The selling-cost assumptions above are illustrative: a 2.5% buyer-agent figure you may choose not to offer at all, and a 1% placeholder for everything else. Real costs vary enormously across the DMV — transfer taxes alone differ by a factor of three between Northern Virginia and parts of Maryland — so treat the shape as instructive and the number as something to build properly for your address.
How Much Equity Do You Have After 1, 3 or 10 Years?
This gets asked constantly, and the honest answer surprises people: from paying your mortgage, almost none early on.
Equity grows two ways. Your balance falls, and your value rises. In the early years the first of those barely moves, because of how amortisation works: your payment is fixed, but the split between interest and principal is not. At the start, nearly all of it is interest.
Here is a $400,000 loan on a 30-year fixed at 6.5%, which is roughly $2,528 a month in principal and interest.
| After | You have paid | Went to principal | Went to interest | Equity built by paying |
|---|---|---|---|---|
| 1 year | $30,339 | $4,471 | $25,868 | 14.7% of what you paid |
| 2 years | $60,679 | $9,241 | $51,437 | 15.2% |
| 3 years | $91,018 | $14,331 | $76,687 | 15.7% |
| 5 years | $151,696 | $25,556 | $126,140 | 16.8% |
| 10 years | $303,393 | $60,895 | $242,497 | 20.1% |
Read year one again. You paid $30,339 and built $4,471 of equity. Roughly 85 cents of every dollar went to the lender as interest. After a decade of payments totalling over $300,000, paydown has built about $61,000 of equity. That is not a scandal, it is just how amortisation works — but it is not what most people picture.
Which leads somewhere important. If you have meaningful equity after only a few years, it came from the market, not from you. Appreciation did the work. And appreciation is precisely the input you cannot measure accurately, which is why the value question at the top of this article matters more than the balance question.
The practical version: after 1 to 3 years, your equity is mostly your deposit plus whatever the market handed you, minus the cost of selling. That last part catches people who bought recently and want to move: on a $700,000 home, selling costs can exceed three years of principal paydown. It is entirely possible to have "equity" on paper and still bring money to closing.
Two things speed this up. Extra principal payments go straight to the balance with no interest attached, and they compound by shortening the loan. And a shorter term, such as a 15-year, front-loads principal far more aggressively — at a higher monthly cost.
Equity Percentage, and What "75% Equity" Means
Two ways to say the same thing, and people mix them up constantly.
Equity Percentage
Your equity÷Home value×100=% you own
The mirror image of LTV. Equity % and LTV always add to 100%.
On a $700,000 home with $400,000 owed: $300,000 ÷ $700,000 = 43% equity, which is the same as a 57% LTV. Both describe one situation.
So "75% equity" means you owe 25% of what your home is worth. On that $700,000 house, a $175,000 balance. It is a strong position, and worth knowing what it does and does not get you: at an 85% CLTV ceiling you could borrow up to $420,000, well under your $525,000 of total equity. Even at 75% equity, roughly a fifth of it stays out of reach.
A correction worth making, because you will see this stated wrongly on large finance sites: dividing your mortgage balance by your home's value does not give you your equity. That gives you your LTV. Equity is value minus balance, not balance divided by value. The two get conflated in a lot of published guidance, including some that ranks well for this exact question.
What If Your House Is Paid Off?
Then your total equity is 100% of your home's value, and your LTV is zero. Congratulations — genuinely, that is a rare position.
It does not mean you can access all of it.
- Total equity: the full value. On a $700,000 home, $700,000.
- Usable equity: still capped by CLTV. At 85% that is $595,000, at 80% it is $560,000. The lender's cushion applies to you exactly as it does to everyone else, and roughly $105,000 to $140,000 stays untouchable.
- Net proceeds: the full value minus the cost of selling. There is no payoff to clear, so this is the closest any homeowner gets to the paper number.
Two things worth knowing if you are in this position. Lenders still assess credit, income and debt-to-income — owning outright does not guarantee approval, and being asset-rich and income-light is a real reason people get declined. And the product you want may be different: with no first mortgage, a cash-out refinance and a home equity loan start to look similar, because you are creating a first lien either way rather than stacking a second.
Seven Ways People Get This Wrong
- Using the Zestimate as market value. Zillow's own published off-market median error is about 7%, and half of homes are worse. It is a bracket, not a number.
- Using the tax assessment as market value. Assessments run on their own cycle and their own methodology. They are for your tax bill.
- Using the balance instead of the payoff. Interest accrues daily and the quote expires. Get a real payoff figure with a real date.
- Forgetting a second lien. Especially an undrawn HELOC, which shows a zero balance and still eats your CLTV headroom.
- Quoting total equity and planning net proceeds. The most expensive error on this list, because the gap is the entire cost of selling.
- Assuming a lender will go to 100%. They will not. Budget from 80–85% CLTV and be pleasantly surprised.
- Forgetting escrow comes back. The only common error that works in your favour, and worth a few thousand you were not counting on.
There is an eighth, subtler one worth naming: treating appreciation as income. Your home going up $80,000 on paper feels like a windfall, but until you borrow against it or sell, it is a number on a screen. Every route to actually touching it has a cost — interest on one side, transaction costs on the other. If you want the options laid out honestly, our guide to tapping home equity without wrecking your position compares them.
Why the Right Number Matters
Because people make irreversible decisions on it.
They plan a renovation on total equity and discover at the lender's desk that usable equity is a hundred thousand lower. They plan the deposit on their next house on total equity and discover at settlement that net proceeds are forty thousand lower, after the offer on the new place is already accepted. They tell themselves they are fine on retirement because a website said their house is worth $780,000, when the honest bracket was $720,000 to $780,000 and half of homes miss by more than the headline error.
The fix is unglamorous. Get a real read on the value from someone who will look at your actual house and your actual comparable sales. Get a real payoff quote with a date on it. Pull your title and find every lien. Ask a lender for their CLTV ceiling before you plan around a number. Then, and only then, do the subtraction.
None of that takes long, and all of it is free or nearly free. What is expensive is finding out at the table.
The Bottom Line
Equity is the easiest formula in real estate and one of the most commonly miscalculated numbers in personal finance, because both inputs are estimates and the output has three different meanings.
Get the inputs honestly: a real valuation rather than an automated one, a real payoff rather than a balance, and every lien rather than the one you remember. Then be precise about which of the three numbers you actually need. Borrowing, you want usable equity, and it is capped near 80–85% CLTV. Selling, you want net proceeds, and the cost of selling comes out first.
And when it does come out, remember that one line of it is yours to decide. On a $700,000 home the difference between a 3% listing fee and our 1.5% is $10,500 of your equity, for the same photography, the same syndication and the same negotiation. That is what we do as a real estate agency working across the DMV.
When you are ready, our Sell My Home page lays out exactly how a 1.5% full-service listing works.
Get Your Real Number
Start With an Honest Valuation
Frequently Asked Questions
How do I calculate how much equity I have in my home?
Take your home's current market value and subtract everything secured against it: your mortgage payoff plus any second mortgage, HELOC, solar loan, tax lien or judgment. The formula is straightforward; the difficulty is that both inputs are usually wrong. Use a real valuation rather than an automated estimate, and a payoff quote rather than your statement balance. Then decide which equity number you actually need, because total equity, usable equity and net proceeds are three different figures.
Is my Zestimate accurate enough to calculate my equity?
Not for anything you plan around. Zillow publishes a nationwide median error rate of roughly 1.8% for on-market homes and roughly 7% for off-market homes. Your home, with no listing on it, is off-market. On a $700,000 house 7% is about $49,000, and because it is a median, half of all homes are off by more than that. Zillow itself states a Zestimate is not an appraisal. Treat it as a starting bracket.
Why is the Zestimate so much more accurate for listed homes?
Partly because listed homes have more current data, and partly because of how accuracy is measured. Zillow compares the most recent Zestimate before a sale to the eventual sale price, and once a home is listed, the Zestimate incorporates the list price and moves toward it. So the on-market figure is partly measuring an estimate that has already seen the answer. The off-market number, which is the one describing your home right now, has no such advantage.
What is the difference between equity and net proceeds?
Equity is your home's value minus what you owe. Net proceeds is what actually reaches your bank account after a sale, which is the sale price minus your loan payoffs minus the cost of selling: listing commission, any buyer-agent compensation you choose to offer, transfer and recordation taxes, settlement and title fees, repair credits and prorations. On a $700,000 home with $400,000 owed, total equity might be $300,000 while net proceeds are closer to $265,000. Your escrow balance is refunded separately and adds to your cash.
How much of my equity can I actually borrow?
Less than you have. Lenders limit combined loan-to-value, and per the Consumer Financial Protection Bureau most cap CLTV at 80% to 85% of appraised value, with some reaching 90% for strong borrowers. The calculation is your home's value multiplied by the lender's maximum CLTV, minus what you already owe. On a $700,000 home with $400,000 owed, that is $160,000 at 80%, $195,000 at 85%, or $230,000 at 90% — against total equity of $300,000.
What is CLTV and why does it matter?
Combined loan-to-value is everything secured against your home divided by your home's value, expressed as a percentage. It matters because it is the ceiling lenders lend to, and because it counts every lien, not just your first mortgage. An undrawn HELOC with a zero balance still occupies CLTV headroom in many lenders' calculations. If your CLTV is already near the cap, you have equity on paper and no borrowing capacity in practice.
Is my mortgage balance the same as my payoff amount?
No, and the payoff is always higher. Your balance is a snapshot from your last statement. Your payoff is what it takes to extinguish the loan on a specific future date, and it includes interest accrued since your last payment calculated per day, interest through the payoff date, any recording or release fees, and any prepayment penalty if your loan has one. Payoff quotes are good only until a stated date. Request one rather than assuming.
Does an undrawn HELOC affect my equity?
It does not reduce your total equity, since you owe nothing on it, but it can absolutely affect what you can borrow. Many lenders count the full credit line rather than the drawn balance when assessing your combined loan-to-value, and the lien remains recorded against your title regardless. It is one of the most commonly forgotten items in an equity calculation precisely because the balance is zero and it never appears on a statement.
Can I use my tax assessment to work out my equity?
No. An assessment is a mass-appraisal figure produced by your locality for taxation, on its own cycle and with its own methodology. It can sit well above or well below market value, and in a moving market it is often stale by design. It is the right number for understanding your tax bill and the wrong number for understanding your equity. Use recent comparable sales or a licensed appraisal instead.
Do I get my escrow balance back when I sell?
Yes. If your lender collects for property taxes and insurance, whatever remains in that escrow account belongs to you once the loan is paid off, and it is typically refunded within a few weeks of settlement. It is not part of your equity calculation, because it is not secured against the home, but it is part of the cash you end up with. It is one of the few items sellers routinely forget in their own favour.
Does having equity guarantee I can get a home equity loan?
No. Equity gets you considered; it does not get you approved. Lenders also look at credit score, debt-to-income ratio, income stability and the property itself. Common expectations run around a credit score of 680 or higher and a DTI below 43%, though this varies by lender and product. It is entirely possible to be equity-rich and still be declined, which is why it is worth asking a lender about their criteria before planning around a number.
How often should I recalculate my equity?
Your loan balance falls predictably every month, so that side takes care of itself. The value side is what moves, and it moves with your local market rather than with national headlines. Checking annually is sensible for general awareness. Recalculate properly, with a real valuation rather than an automated estimate, whenever you are about to make a decision that depends on the answer: borrowing, refinancing, selling, or planning a purchase around the proceeds.
What lowers my home equity?
Two things: your home's value falling, or the debt secured against it rising. The second is more common and more controllable. Taking a HELOC or home equity loan, cash-out refinancing, financing solar panels against the property, or having a lien or judgment recorded all reduce your equity immediately. Interest-only or negatively amortising terms can erode it quietly. Renovations may add value, but rarely dollar-for-dollar with what they cost.
Should I borrow against my equity or sell?
It depends on which number you need and what it costs to reach it. Borrowing keeps the house but adds a payment, interest, and a lien, and caps you near 80 to 85% CLTV. Selling releases substantially more of the equity but costs you the transaction and the home. Neither is free. The honest way to decide is to build both numbers properly for your own position first, then compare them, rather than deciding and then finding the number to support it.
How much equity do I have in my home after 1 year?
From paying the mortgage, very little. On a $400,000 loan at 6.5% over 30 years, your first year of payments totals about $30,339, of which roughly $4,471 goes to principal and $25,868 to interest. So paydown builds under 15% of what you paid. Any meaningful equity after one year came from your deposit and from the market moving, not from your payments. After selling costs, a one-year-old purchase can easily have less usable equity than the owner expects.
How much equity do I have after 3 years, or 10 years?
On that same $400,000 loan at 6.5%, after three years you have paid about $91,018 and built roughly $14,331 of equity from principal. After ten years you have paid about $303,393 and built roughly $60,895. The share going to principal climbs slowly, from about 14.7% in year one to about 20.1% by year ten. Everything above those figures came from appreciation, which is the input nobody can measure precisely.
How much equity do I have if my house is paid off?
Your total equity equals 100% of your home's market value and your LTV is zero. You still cannot borrow all of it: lenders apply the same combined loan-to-value ceiling, so at 85% CLTV on a $700,000 home you could borrow up to $595,000, leaving roughly $105,000 out of reach. Approval also still depends on credit, income and debt-to-income. If you sell, net proceeds are the full value minus the cost of selling, with no payoff to clear.
How do I calculate my equity percentage?
Divide your equity by your home's value and multiply by 100. On a $700,000 home with $400,000 owed, that is $300,000 divided by $700,000, or about 43% equity. It is the mirror of your loan-to-value ratio: equity percentage and LTV always add up to 100%, so 43% equity is the same situation as a 57% LTV. Both are just different ways of describing the same house.
What does 75% equity mean?
It means you owe 25% of what your home is worth, so your LTV is 25%. On a $700,000 home that is a balance of about $175,000 and total equity of about $525,000. It is a strong position, but the CLTV ceiling still applies: at 85% you could borrow up to roughly $420,000, so around a fifth of your equity remains inaccessible even at 75% equity.
Is equity my mortgage balance divided by my home's value?
No, and this is a common error that appears even on large finance sites. Balance divided by value gives you your loan-to-value ratio, not your equity. Equity is value minus balance. On a $700,000 home with $400,000 owed, the division gives 57%, which is your LTV; the subtraction gives $300,000, which is your equity. If a source tells you to divide to find equity, it has conflated the two.
Is there a calculator I can use to work out my home equity?
Yes, there is one in this article. Choose the closest figure for what your home is worth and what you still owe, and it shows all three numbers at once: total equity, usable equity at an 85% CLTV ceiling, and estimated net proceeds if you sold. It is illustrative rather than a valuation or a lending decision, but it makes the gap between the three visible, which is the part most calculators leave out.
Why do most equity calculators only give one number?
Because they are usually built by a lender, and lenders are interested in one question: how much can you borrow. That number is real, but it is not your equity, and it is not what you would walk away with if you sold. A bank's calculator has no reason to subtract a listing commission or transfer taxes. If you are weighing borrowing against selling, a single-number calculator cannot answer the question you actually have.
Glossary
Home equity: Market value minus everything secured against the home. The number on paper.
Usable equity: What a lender will actually lend against, after the CLTV cap. Always less than total equity.
Net proceeds: What reaches your account after a sale, once payoffs and selling costs come out.
CLTV: Combined loan-to-value. All liens divided by value. Usually capped at 80–85%, sometimes 90%.
LTV: Loan-to-value. The same idea for a single loan rather than all of them combined.
Payoff: What it takes to extinguish the loan on a given date. Higher than your balance, and it expires.
Lien: A legal claim recorded against your property. Every one of them reduces your equity.
AVM: Automated valuation model. A Zestimate is one. Useful as a bracket, not as a number.
Median error rate: Half the estimates are off by less, half by more. Not a maximum, a midpoint.
Amortisation: How a payment splits between interest and principal. Early on it is mostly interest.
Equity percentage: Equity divided by value. The mirror of LTV; the two always total 100%.
Escrow balance: Money your lender holds for taxes and insurance. Refunded to you after payoff.
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