Value

Value summary: 

• Value of a home is an important concept when applying for mortgages, home equity loans, and HELOCs. It also affects your property taxes. 

• Home value is an important part of many people's personal wealth, as they build up home equity by making mortgage payments over the years. 

• Knowing the value of your home could help you understand how to make the most of your home equity.  

Value definition and meaning

Value of a home is the estimated price that a home could sell for, based on the home’s quality, location, and size as well as overall conditions in the local housing market. How much buyers are willing to pay, mortgage interest rates, and other factors that constantly change mean that the value of a home also constantly changes. 

Lenders typically measure a home’s value with an appraisal during the approval process for a home mortgage, home equity loan, or home equity line of credit (HELOC). That's because these are secured loans where the home is collateral, meaning it backs up the loan. Knowing the value of that home helps the lender decide how much money you can borrow for a mortgage loan.  

Key concept: The estimated price a home is worth, based on the quality, location, and size of the home and on housing market conditions. 

More on value

Learning how your home is valued may help you decide the best way to use your home's equity, whether it's getting a mortgage or applying for a home equity loan or HELOC. If you know your home’s value, you’re in a better position to make informed choices about how and when to use your home equity to reach your financial goals. 

Value: a comprehensive breakdown 

Here are a few ways that the value of a home matters for your financial life. 

Home value can dictate the size of your mortgage

Most of us need a mortgage to buy a home, and the size of that mortgage will depend on the sales price of the home. Usually, the sales price will be determined by the value of the home.

Your ability to get a mortgage in a certain price range depends on factors such as your income and credit score. If you’re buying a home at the higher end of your price range, you may need to make a larger down payment or qualify for a loan with smaller down payment requirements.

That's because lenders typically decide on your mortgage limits using the loan-to-value ratio. This is the size of the mortgage compared to the home's value. 

For example, let’s say you have a $20,000 down payment but you want to buy a $300,000 home. You’d need a mortgage that lets you borrow $280,000—or 93% of the home’s value. If you made a $60,000 down payment instead, the LTV would drop to 80%.

The minimum LTV will vary based on the type of loan and the lender's specific requirements. Most experts recommend at least a 20% down payment, though many lenders will allow an LTV up to 97% for certain loan types.

Home value helps homeowners build wealth

The value of a home is part of a homeowner’s personal wealth and net worth. When home values rise, homeowners gain more home equity (the difference between the selling price of a home and the amount owed on a mortgage). 

Home prices don’t always go up, but when they do, homeowners build wealth. As the value of your home goes up over the years, this turns your home equity into a kind of invisible savings account that grows over time as you pay down your mortgage. 

For example, in 2025, the median selling price of a home in the U.S. was $410,800. Let’s say your home is valued at $410,800 and your mortgage balance is $350,000. This means your home equity is $60,800.   

Home value helps you qualify for home equity loans 

If you’re already a homeowner, your home has probably been building up some of that invisible savings account. Homeowners may decide to use their home equity as a source of leverage by taking out a home equity loan or home equity line of credit (HELOC). 

Home equity loans and HELOCs could be a good way to pay for home renovations and repairs, or major expenses like education. Home equity loans and HELOCs could also be used for debt consolidation if you have high-interest credit card debt that you want to get rid of faster. When you borrow against the value you’ve built up in your home, you turn your built-up equity into funding for whatever you need. 

Types of value

Home value fluctuates, because the prices of homes are constantly changing. You might think your home is worth a certain amount, but other buyers might not be willing to pay that same amount in three months. Lenders and government officials also have different ways of calculating home value. 

Home value is measured in a few different ways.

Assessed value

This is the value of a home as it is assessed for property taxes by local government authorities. The assessed value of your home might be less than you paid for it and less than you might hope to sell it for. Local property taxes are often based on the assessed value of property, such as a certain percentage per $1,000 of assessed value. 

Appraised value

This is the value of a home that is based on a professional appraisal. Lenders often use appraised value to decide how much money to lend for a mortgage, home equity loan, or HELOC. To determine appraised value, lenders might hire a professional home appraiser to evaluate the home in-person and make an informed estimate of the home’s selling price. Other lenders use automated valuation model (AVM) software. 

Market value

This is the actual selling price of the home, also known as fair market value. When you want to sell your home, you can list it on the local housing market for an asking price and find out who wants to buy it. In high-demand housing markets, home buyers sometimes get into bidding wars, which drive up homes’ market values. 

If there’s a downturn in the housing market and more homes for sale than interested buyers, sellers may have to lower the asking price to stay inline with a lower market value. Homeowners could be disappointed when they try to sell  and discover that buyers are only willing  to pay less than the asking price. Just like any other asset, your home’s market value is ultimately worth what buyers will pay for it.