What Is Equity in Housing?

Quick Scoop

Housing equity is the part of a home you truly own. It is usually calculated as the home’s current market value minus what you still owe on the mortgage or other liens.

[1][2][6]

Simple Example

• If your house is worth $400,000 and you still owe $250,000, your equity is $150,000.
[2][1]
• If the home’s value rises or you pay down the loan, your equity goes up.
[5][8][1]

How It Builds

• Down payment: part of your equity starts the day you buy the home.
[1][5]
• Mortgage payments: every payment that reduces principal increases equity.
[5][1]
• Home value growth: if the property appreciates, equity can rise even faster.
[8][5]

Why It Matters

• You can use equity as a measure of your ownership stake in the property.
[6][1]
• Some lenders may use it when deciding whether you qualify for a home equity loan or HELOC.
[3][5]
• It is also important when selling, refinancing, or planning your finances.
[10][5]

One-Liner

Equity in housing is the value of your home that is yours after subtracting the debt still attached to it.

[2][6][1]

Bottom line: more home value and less mortgage debt usually means more equity.

[1][5]