Your home equity is the part of your home you truly own. It’s also the number that decides how much an equity lender will consider. Here’s how to work it out, and why the number a lender uses is usually smaller than the one you start with.

The basic formula

Home value − everything owed against the home = home equity

“Everything owed” means your mortgage balance plus any other debt registered on the property: a second mortgage, a secured line of credit, or a lien.

For example, using round numbers only to show the math: a home worth $500,000 with a $280,000 mortgage and a $20,000 secured line of credit has $200,000 in equity.

Total equity vs usable equity

Lenders won’t lend against all of your equity. They set a maximum loan-to-value: the most that total borrowing can reach as a share of the home’s value. Federally regulated banks, for example, limit a refinance to 80% of the home’s value. Other lenders set their own limits, which vary by lender, property and location.

Continuing the example: at a hypothetical 80% limit, total borrowing could reach $400,000. With $300,000 already owed, the usable equity is about $100,000, before fees and costs. See how much equity you need for more.

Where the home value comes from

You might start with a listing site estimate or your property tax assessment, but a lender will rely on an independent appraisal. Appraisals can come in higher or lower than you expect. Our guide to assessed, market and appraised value explains why these numbers differ.

A quick way to estimate

  1. Find your balances on your latest mortgage and line of credit statements.
  2. Estimate a conservative value based on recent sales of similar homes nearby.
  3. Multiply the value by a lending limit (try 75% and 80% to see a range).
  4. Subtract what you owe. The result is a rough range of usable equity.

Why your equity changes

Equity grows as you pay down your mortgage and as values rise, and shrinks when you borrow more or when values fall. See how Alberta home prices affect your equity.

Get a number you can rely on

A licensed mortgage broker can give you a realistic usable-equity range for your property and explain which lenders would use which limits.

This article is general information, not financial or legal advice. Lender requirements, rates and fees change and depend on your situation.