Definition
Home equity is the portion of property value you own outright. It's calculated as current market value minus your outstanding mortgage balance. Equity increases as you pay down the mortgage and as property appreciates.
Where you’ll meet it
What's my current home worth, and what will I walk away with?
See it in Moving up to my next home · Step 1About this term
Home equity increases as you pay down the mortgage and as the property appreciates. For example, a $400,000 home with a $300,000 mortgage has $100,000 equity.
Pro Tip
Build equity through mortgage payments and appreciation.
Example
The home was purchased for $350,000 with a $280,000 mortgage. Five years later, the home was worth $400,000 and the mortgage was $260,000, giving $140,000 equity.