What Is Home Equity?
Home equity is the portion of a property's value the homeowner actually owns — the difference between what the home is worth and what's still owed on any mortgage.
Advanced Explanation
Equity is the property's current market value minus all liens secured by it (first mortgage, HELOC balance and any other liens). Lenders limit borrowing against equity with combined loan-to-value caps, so the equity you can actually borrow against is lower than total equity.
Formula
Home Equity = Home Value − Mortgage Balance
Example
A $500,000 home with a $320,000 mortgage balance has $180,000 in home equity.