How Home Equity Works

Home Equity

We repeatedly express how owning a home is a great way to build equity. But, what exactly is the equity that exists in your home? How might you gain equity in your home when you still owe on your mortgage? Learn more about what home equity is and what that may mean for you when you go to refinance from our team at Corken + Company. 

Home equity is defined as simply what your home is worth, which is calculated by finding the difference between what your home’s value is and the amount you may owe towards your mortgage. 

Take this example from

For example, if your home value is currently $200,000 and you have paid off $20,000, you have 10% in home equity. To calculate your home equity, use this equation: (amount you have paid off ÷ current home value) X 100 = equity. So, using the numbers from the example above: (20,000 ÷ 200,000) X 100 = 10% equity.”

The money that you earn from owning your home can be used to invest, buy more property, or even put toward your retirement. At the eventual time of your sale, your equity may be used to pay off closing costs, and any extra money would be yours to keep. 

Refinancing comes into play because interest rates are constantly changing (sometimes for better, others for worse). In addition, you may be interested in adjusting the terms on which your loan is paid. Your loan-to-value ratio in your home will impact how much equity you have in your home. According to, “Most conventional lenders require at least 10% home equity for a refinance. If you have less than 20% in home equity, you will have to pay PMI, which will add to your monthly payments. However, if you are already paying PMI, or if your interest rate is higher than today’s mortgage rates, a refinance may still make sense.” (Check out their refinance calculator)  If this is the case, it may be worth considering refinancing and paying off your mortgage at a lower rate. 

Whether you’re considering refinancing, or just wondering how much equity is in your home, understanding what your home is worth is important. An experienced realtor, like the team at Corken + Company, can help. Home values change based on the market, so our team would be happy to sit down and help you value your home in real-time. Contact us today at or 303-858-8003

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Rachel Sartin

Lori Corken