Home equity
What is home equity?
Home equity is your home's current value minus everything owed against it. It grows through principal payments and through appreciation.
How it is calculated
Home equity = home value − all balances secured by the home
What it means in practice
Equity is not cash. Converting it to cash requires borrowing against it or selling, and both carry costs.
A cash-out refinance, a HELOC and a home equity loan all convert equity into debt. Only the price and the structure differ.
Selling costs — agent commissions, transfer taxes, repairs — reduce the equity you actually realize, which is worth remembering when comparing scenarios over a short stay.