What Is Home Equity? How It Works & How to Use It
Home equity is the portion of your home that you truly own—it’s the difference between your home’s current value and what you still owe on your mortgage.
With FBKC Mortgage and your dedicated FBKC loan officer, you can not only understand your equity, but also explore ways to put it to work for your financial goals.
What Is Home Equity?
Home equity is calculated by subtracting your remaining mortgage balance from your home’s current market value.
As you pay down your loan and your home value increases, your equity grows over time.
Example:
- Home value: $400,000
- Mortgage balance: $250,000
- Home equity: $150,000
How Does Home Equity Work?
Paying Down Your Mortgage
Each monthly payment reduces your loan balance, increasing your ownership stake.
Streamlined online process
From online application to e-closing options, our digital mortgage platform makes the process quick and convenient.
Home Value Appreciation
If your home’s value rises, your equity grows—even if your loan balance stays the same.
Over time, many homeowners build significant equity they can access if needed.
HELOC vs Home Equity Loan:
What’s the Difference?
HELOC
- Revolving credit line
- Variable rates
- Flexible usage
Home Equity Loan
- Lump sum
- Fixed rates
- Best for one-time expenses
How Much Equity Can You Borrow?
Most homeowners can borrow up to 80–90% of their home’s value, minus what they still owe. At FBKC Mortgage, we offer some home equity products that allow for up to 100% LTV. How much you can borrow depends on:
- Your credit profile
- Loan-to-value ratio (LTV)
- Income and financial stability
Your FBKC loan officer can help you determine your available borrowing power.
What Can You Use Home Equity For?
Home improvements or renovations
Major purchases
Education costs
Streamlined online process
From online application to e-closing options, our digital mortgage platform makes the process quick and convenient.
Debt consolidation
Frequently Asked Questions About Home Equity
With reliable and easy to understand answers.
What is home equity in simple terms?
Home equity is the difference between your home’s value and what you owe on your mortgage.
How do you calculate home equity?
You calculate home equity by subtracting your remaining mortgage balance from your home’s current value.
How much equity do I need to borrow?
Most homeowners need at least 15–20% equity to borrow against their home, depending on the loan type and financial profile.
Can you use home equity for anything?
Home equity can be used for many purposes, including home improvements, debt consolidation, and major expenses.
Is it a good idea to use home equity?
It can be a good option if used strategically, but it’s important to consider the risks since your home is used as collateral.
How can I increase my home equity?
You can increase equity by paying down your mortgage, increasing your home’s value, or making improvements.
Does home equity increase automatically?
It can increase over time as you pay down your loan and if your home’s value rises.
How Do I Build Home Equity Faster?
If you want to increase your equity more quickly:
- Make extra mortgage payments
- Choose a shorter loan term
- Improve your home’s value through renovations
- Avoid taking on additional debt
How do I get started?
Getting started with FBKC Mortgage is simple:
- Connect with your dedicated FBKC loan officer
- Estimate your home value and equity
- Explore your options
- Choose the best path forward