Home Equity Guide
Your home is likely your biggest asset. Learn how to leverage your equity smartly — whether you want to renovate, consolidate debt, or fund a major expense.
What is Home Equity?
Home equity is the difference between your home's current market value and the amount you still owe on your mortgage. As you pay down your mortgage and/or as your home appreciates in value, your equity grows.
Home Equity = Current Market Value − Outstanding Mortgage Balance
Example: $550,000 home value − $320,000 mortgage = $230,000 equity
Homeowners typically need at least 15–20% equity (meaning you owe no more than 80–85% of your home's value) before lenders will let you borrow against it. The more equity you have, the better your rates and terms will be.
Ways to Access Your Home Equity
Cash-Out Refinance
Replace your current mortgage with a larger one and take the difference as cash. Best when rates are favorable.
HELOC
A revolving credit line secured by your home. Flexible — borrow only what you need, when you need it.
Home Equity Loan
A lump-sum second mortgage at a fixed rate. Predictable payments, good for one-time large expenses.
In-Depth Guides
HELOC vs. Cash-Out Refinance
A side-by-side comparison of the two most popular ways to tap your home equity — and which is better for your situation.
HELOC Requirements
Credit score, equity, and income requirements to qualify for a home equity line of credit in 2025.
Using Home Equity to Consolidate Debt
How homeowners use cash-out refinancing and HELOCs to pay off high-interest debt and save thousands.
Frequently Asked Questions
How much equity can I borrow?
Most lenders allow you to borrow up to 80–85% of your home's value, minus what you owe. For example, if your home is worth $500,000 and you owe $300,000, you may be able to borrow up to $100,000–$125,000.
What is the difference between a HELOC and a home equity loan?
A HELOC is a revolving line of credit with a variable rate — you borrow what you need, when you need it. A home equity loan is a lump sum at a fixed rate. Both use your home as collateral.
Can I get a HELOC if I have a first mortgage?
Yes. A HELOC is typically a second lien on your home. Your total debt (first mortgage + HELOC) generally cannot exceed 85% of your home's appraised value.
Is home equity loan interest tax deductible?
Interest may be deductible if the funds are used to buy, build, or substantially improve your home. Consult a tax advisor for your specific situation.
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