How do I calculate home equity?

Current market value less what you still owe. But the more useful question is where it came from, because equity has three sources that behave quite differently: the deposit you put down, the principal you have repaid, and appreciation in the market. Only the middle one is under your control, and it is usually the smallest of the three in the early years.

Why is my equity growing so slowly from payments?

Because early mortgage payments are nearly all interest. On the worked example here, four years of payments totalling $122,874 removed just $20,009 of principal — the other $102,865 went to the lender as interest. Amortisation is deliberately back-loaded: the balance is largest at the start so the interest charge is largest, and the principal portion of each payment grows steadily through the term. By the final years almost every dollar reduces the balance.

How much of my equity is from appreciation?

At a typical rate of house price growth, roughly three quarters of what you build in the first decade. On the example here appreciation contributed seventy-four percent and payments twenty-six, and that ratio is fairly stable across the early years. It is worth knowing because it means most homeowners have been enriched by the market rather than by discipline — and the market is not a plan. Setting appreciation to zero on this page shows what remains without it.

When can I stop paying mortgage insurance?

There are three dates and they are not the same. You may request cancellation once the balance reaches eighty percent of the original value, which requires you to write and ask. It terminates automatically at seventy-eight percent. And it must end at the midpoint of the term regardless of the balance. All three use the price you paid and the original schedule, so appreciation does not bring them forward — though you can ask the servicer to consider a new appraisal, which some will accept and some will not.

Does my home appreciating remove PMI sooner?

Not by itself, which surprises people. The statutory thresholds run off the original purchase price and the original amortisation schedule, so a house that has gained fifty thousand dollars still reaches eighty percent on exactly the same date. What can help is asking the servicer to reconsider on a current appraisal — many will, particularly after two years and with a good payment history, though you pay for the appraisal and there is no obligation on them to agree. Paying the balance down does work, because that moves the schedule.

What happens if my home loses value?

Equity falls by the same amount, and it can go negative — the worked example at minus five percent a year leaves the house worth $366,528 against a $384,991 balance. Being underwater does not matter directly if you simply keep paying and stay put, since nothing is triggered by it. What it does is remove your options: you cannot sell without bringing cash, you cannot refinance, and you cannot borrow against equity you do not have. That loss of flexibility is the real cost.

How can I build equity faster?

Only two levers exist and one of them is not yours. Paying extra principal is the reliable one and its effect compounds, because every dollar removed stops accruing interest for the rest of the term. Improvements can add value but rarely return their full cost, and the ones that do tend to be unglamorous — kitchens and bathrooms recover more than swimming pools or extensions. Waiting for appreciation is not a strategy, though it is what most equity turns out to be.

How do I find out what my home is worth?

A formal appraisal is the only figure a lender will act on, and costs a few hundred dollars. Online estimates from listing sites are free and useful for a rough sense, but they work from public records and comparable sales and can be badly wrong on unusual properties or in thin markets. A local agent will often give a comparative market analysis at no charge. For this page, an estimate is fine — but if the number matters, for a refinance or a cancellation request, pay for the appraisal.

What is the difference between equity and usable equity?

Equity is value less debt. Usable equity is what a lender will actually let you borrow against, which is considerably less — most cap combined borrowing at eighty to eighty-five percent of the value, so a slice of your equity is permanently out of reach as their cushion. On a house worth $506,479 with a $384,991 balance, the equity is $121,488 but at eighty-five percent combined loan-to-value only $45,516 could be borrowed. The gap widens as prices fall.

Should I borrow against my equity?

It depends entirely on what for, and the honest answer is that it converts an asset into a debt secured on your home. Borrowing to improve the property has a case, since it may add value and the interest may be deductible. Borrowing to consolidate unsecured debt lowers the rate but moves the risk onto your house, and stretches a short obligation across decades. Borrowing to spend puts your home behind a purchase. The rate is lower than most alternatives for a reason: the collateral is where you live.

Home Equity Calculator

Equity has exactly three sources, and people are usually wrong about which one is doing the work. There is the deposit, which was yours from the first day and never changes. There is the principal you have repaid, which grows painfully slowly at first because early payments are nearly all interest....

WHEN YOU BOUGHT

PURCHASE PRICE ($)

DEPOSIT (%)

RATE (%)

TERM (YRS)

YEARS AGO

APPRECIATION (% / YR)

OR VALUE NOW ($)

Projecting $506,479 today. Enter a known value on the right to override it.

YOUR EQUITY TODAY

$121,488

A home worth $506,479 against a balance of $384,991, so a loan-to-value of 76.0%. Of the $76,488 you have built since buying, 74% came from the market and 26% from your payments.

DEPOSIT

$45,000

PRINCIPAL PAID

$20,009

APPRECIATION

$56,479

Most of what you have built is the market, not the mortgage. Your payments have removed $20,009 of debt in 4y, while the house has gained $56,479. That is worth knowing because only one of those two is under your control, and it can move the other way — a flat or falling market would leave you with the $20,009 and nothing else.

You can ask for mortgage insurance to be cancelled at 7y 11m. That is 3y 11m away, and about $8,930 of premiums between now and then. It ends without asking at 9y 1m, and must end at the halfway point of the term, 15y, whatever the balance. All three dates use the price you paid, not the value today.

Purchase price

$450,000

Value today

$506,479

Original loan

$405,000

Balance now

$384,991

Deposit

$45,000

Principal paid

$20,009

Appreciation

$56,479

Equity

$121,488

LTV on value today

76.0%

LTV on the price paid

85.6%

PMI request at

7y 11m

PMI ends at

9y 1m

This is an estimate, not an appraisal. A projected value is a guess dressed as a number — house prices do not compound smoothly and local markets diverge sharply from national averages. It also assumes no extra payments, no refinancing and no money spent on improvements. Equity is only realised on sale or by borrowing against it, and both cost money.

THE BUILD

The green band is the only one you control. It starts almost flat, because early payments are nearly all interest, and steepens through the term. The gold band above it is the market, which does most of the work in a rising one and none at all otherwise — set appreciation to zero and watch what is left.

Live calculation · updates as you type

Created with❤️byeaglecalculator.com

HOW TO USE

1
Enter what you paid and what you put down, not what the house is worth now — the calculation works forward from the purchase so it can separate the three sources.
2
Set an appreciation rate, or enter a known current value on the right to override it. If you have a recent appraisal or a firm sense of local prices, the override is the better figure.
3
Try setting appreciation to zero. That shows what your payments alone have built, which is the part that does not depend on the market holding up.
4
If your deposit was under twenty percent, open the mortgage insurance section. The cancellation dates are worth diarising, because the first one requires you to ask.

FREQUENTLY ASKED QUESTIONS

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Last updated: July 31, 2026 · Formula verified · Estimate only, not an appraisal.