Home Equity Calculator

Current equity, and the two ways it grows

Current equity is one subtraction: home value minus mortgage balance. On this calculator's own default inputs — home value $450,000, mortgage balance $280,000 — that's $170,000 today, at a current loan-to-value of 280,000 ÷ 450,000 = 62.2%. Projecting forward, that equity grows from two genuinely separate sources: the home appreciating in value, and the mortgage balance shrinking as you make payments. The calculator tracks both separately because they behave completely differently and are driven by different inputs.

Notice the split: $184,769 of that ten-year gain comes from appreciation and only $61,384 comes from paying down the loan — appreciation is doing about three times the work paydown is, on these inputs. That's the opposite of the intuition most people bring to a mortgage, where every payment feels like the thing building equity. Early in a loan's amortization schedule, most of each payment is still interest, so paydown is genuinely slow at first; appreciation doesn't care what year of your amortization schedule you're in.

What extra payments actually buy you

Run the same 10-year projection with an extra $200 a month toward principal and the paydown side of the ledger moves a lot: the balance after 120 months drops from $218,616 to $184,471, so equity-from-paydown rises from $61,384 to $95,529 — an extra $34,145 in equity for an extra $200 a month, or $24,000 total in payments. Total ten-year equity rises from $416,154 to $450,298. The appreciation side of the projection — $184,769 — doesn't move at all, because extra principal payments have zero effect on what the home is worth; they only affect how fast you owe less on it.

That's a useful gut check when comparing extra mortgage payments to other uses of the same money: the $200/month example turns roughly $24,000 of extra payments into $34,145 of extra equity over ten years, which is the loan's own amortization math working in reverse, not a market return.

Total equity isn't borrowable equity

The equity number that matters for a HELOC or a home equity loan is smaller than the equity number above, because lenders cap how much of a home's value they'll lend against combined across every lien on the property. This calculator applies an 85% combined loan-to-value ceiling to project usable equity: on the ten-year default scenario, that's (634,769 × 0.85) − 218,616 = $320,938 potentially accessible, out of $416,154 in total projected equity — a gap of roughly $95,000 that a lender simply won't lend against.

Why the equity you build isn't automatically deductible if you borrow against it

Building equity and borrowing against it are two different events for tax purposes, and IRS Publication 936 is specific about the second one: "No matter when the indebtedness was incurred, you can no longer deduct the interest from a loan secured by your home to the extent the loan proceeds weren't used to buy, build, or substantially improve your home." In other words, the $416,154 of projected equity in the example above generates no deduction by existing — only interest on money you actually borrow against it, and only if you spend that money on the home itself, can be deductible, and even then only within the combined $750,000 acquisition-debt limit ($375,000 married filing separately) covering your first mortgage and any qualifying home-equity debt together.

It's also worth being direct about a deduction that no longer exists: Publication 936 states plainly that the itemized deduction for mortgage insurance premiums "has expired" and "you can no longer claim the deduction." If your equity and LTV are still high enough to require PMI, budget for it as a straight cost — it will not reduce your tax bill.

Two exceptions widen the deductible-debt ceiling for older mortgages: debt taken on or before October 13, 1987 is grandfathered outside the current limits entirely, and a loan under a written binding contract signed before December 15, 2017 — closing before January 1, 2018 and completing before April 1, 2018 — is treated as pre-December 16, 2017 debt, with the higher $1 million ($500,000 married filing separately) ceiling instead of $750,000. Most homeowners running this projection on a mortgage originated in the last several years fall under the $750,000 / $375,000 rule.

Where this calculator's rate assumption sits today

The default 6.75% mortgage rate used above sits close to the published market: Freddie Mac's Primary Mortgage Market Survey reported 30-year fixed mortgages averaging 6.71% and 15-year fixed at 6.04% for the week ending September 3, 2026, up from 6.66% and 5.98% the week before. Because this is a fixed first-mortgage rate — unlike a HELOC's variable, lender-quoted rate — the PMMS figure is a legitimate stand-in if you don't know your own rate offhand; your actual statement will always be more accurate for this calculator's paydown projection.

The size of the mortgage itself matters for which rate applies, too. The Federal Housing Finance Agency's 2026 baseline conforming loan limit for a one-unit home is $832,750, rising to a $1,249,125 ceiling in high-cost areas. A mortgage balance above whichever of those figures applies locally is a jumbo loan, and jumbo pricing doesn't reliably track the Freddie Mac PMMS average quoted above, which is built from conforming loans. If the mortgage balance in this projection is well under $832,750, the PMMS rate is a reasonable stand-in; well above it, expect your actual quote to diverge from it in either direction.

What this projection can't see

• ·A flat, unchanging appreciation rate for the entire projection period. Real home values move in cycles, not straight lines — some years above the assumed rate, some below, occasionally negative.
• ·Selling costs. None of the equity figures above account for real estate commissions, transfer taxes, or other costs of actually converting equity into cash by selling.
• ·A change in the mortgage rate over the projection window — the calculator holds your entered rate fixed even on an adjustable loan.
• ·Any new borrowing against the home during the projection period, which would reduce future equity below what's projected here.