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Home Equity Loans
How home equity fits into your net worth calculation
Oct 01, 2026
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Key takeaways:
Home equity, the current value of your home minus the debt secured by it, counts as an asset in your net worth.
Home equity isn’t the same as cash. You generally need to sell your home or borrow against your equity to access the money.
Your home equity could grow as you pay down your mortgage and if your home increases in value.
Home equity counts as an asset when you calculate your net worth. It represents the portion of your home’s value that you own after accounting for any debt secured by the property.
Your net worth could include cash, investments, real estate, and other assets. For some homeowners, equity turns out to be one of the largest assets on that list, sometimes larger than savings or investments.
Does net worth include home equity?
Yes, home equity is part of your net worth. Net worth is the value of everything you own minus everything you owe. Your home’s market value is an asset, while your mortgage and other loans secured by the home are liabilities.
What is home equity, and how do you calculate it?
Equity in a home is the difference between your home’s current market value and the balance of the loans secured by the property, such as your mortgage.
Here’s a simple formula showing how to calculate home equity:
Home value − loan balance(s) = home equity
For example, if your home is worth $490,000 and your mortgage balance is $150,000:
$490,000 − $150,000 = $340,000
You have $340,000 in home equity.
Your mortgage statement can give you your current loan balance. To estimate your home’s value, you could use a recent appraisal, a professional valuation, or a reputable home-value estimate tool.
This number is a snapshot of your home's potential value at a given time. If you borrow against your home equity, a lender will likely use its own appraisal or valuation to determine how much you could borrow.
Your equity changes with your mortgage balance and your home’s market value. If you have a home equity loan or home equity line of credit (HELOC), that balance also reduces your home equity.
For more information on borrowing against home equity, check out our guide on how a home equity loan works.
How home equity fits into the net worth equation
Home equity works like other assets in your net worth calculation, with one distinction: There is often debt attached to it.
Your home’s full market value sits on the asset side. Your mortgage and other loans secured by the property sit on the liability side. Home equity is what remains after subtracting one from the other.
Here’s a simple example as part of a net worth calculation:
Category | Item | Amount |
Assets | Cash and savings | $20,000 |
Assets | Investment accounts | $50,000 |
Assets | Home value | $400,000 |
Total assets | $470,000 |
|
Liabilities | Mortgage balance | $250,000 |
Liabilities | Credit card and other debt | $5,000 |
Total liabilities | $255,000 |
|
Net worth ($470,000 - $255,000) | $215,000 |
|
Your total assets are $470,000. Your total liabilities are $255,000, giving you a net worth of $215,000. The home contributes $150,000 to your net worth after accounting for the mortgage.
Why home equity is treated differently than cash
The main difference between home equity and cash is liquidity. Cash is easily and immediately accessible if you need it.
Home equity isn’t. You can’t transfer it, spend it, or withdraw it directly. To use the equity in your home, you generally have two choices: sell the home or borrow against the equity.
Cash also has a fixed value. Home equity can go up or down depending on the real estate market.
When it makes sense to leave home equity out of your net worth
Home equity isn’t included when calculating your liquid net worth. Liquid net worth only factors in the value of cash and assets you could quickly turn into cash, such as certain types of investments.
That doesn’t mean home equity stops counting toward your total net worth. It means you’re using a different measure for a different purpose with liquid net worth, usually short-term planning or a quick read on how much of your wealth is within immediate reach.
How can you grow your home equity?
The most reliable way to grow your home equity is to pay down your mortgage and any other loans secured by your home. If you want to build home equity more quickly, consider paying extra toward your mortgage each month.
Your home equity also grows if your home’s market value increases. You may be able to raise your home’s value through home improvements, although many projects can cost more than the value they add. The value of your home could also increase over time through real estate appreciation.
How do I use the equity in my home?
If you’ve built sufficient equity, you might be able to use it with a home equity loan or HELOC. Both of these use your home as collateral, and the amount you could borrow depends on factors such as your available equity, credit, income, existing debt, and the lender’s requirements.
A home equity loan is a one-time loan, which could be useful if you know how much you want to borrow and prefer fixed monthly payments. A HELOC could provide more flexibility because you can borrow, repay, and borrow again up to your credit limit during the draw period, which generally lasts for the first five to 10 years.
The payment, the term, and how the loan fits your broader goals are all worth factoring in alongside how much equity you have.
Use your home equity with Achieve Loans
If you’re ready to explore your options,Achieve Loans offers a fixed-rate HELOC that can help you use the equity in your home without refinancing your existing mortgage. Your current mortgage rate and term remain unchanged.
Find out if you qualify today.
Author Information
Written by
Lyle is a financial writer for Achieve. He also covers investing research and analysis for The Motley Fool and has contributed to Evergreen Wealth and Monarch Money.
Reviewed by
Kimberly is Achieve’s senior editor. She is a financial counselor accredited by the Association for Financial Counseling & Planning Education®, and a mortgage expert for The Motley Fool. She owns and manages a 350-writer content agency.
Frequently asked questions about home equity and net worth
Yes, it could. It depends on how you use the funds.
Before you spend any of the money, you have a new asset in the money you borrowed—and an equal amount of debt. The asset and debt offset each other, keeping your net worth the same.
Once you use the money you’ve borrowed, your net worth could change. If you put the money toward expenses, for instance, your net worth may decrease, as you’ve spent the cash but still have the debt. If you use the money to consolidate debt, however, then your net worth could stay the same at first, and then increase as you pay down your home equity loan or HELOC.
No, you don’t pay extra taxes simply because you have home equity. That said, tax rules could apply to transactions involving your home, such as profit from home sales or the use of home equity loan proceeds.
Homeowners also normally need to pay property taxes, which typically depend on your home's value but not specifically your home equity. Consult a tax professional to learn more about your situation.
No. Home improvements only impact your equity if they impact your home's value. An improvement that increases your home’s market value could increase your equity. The impact depends on the project and how much value it adds to the property.
For example, spending $20,000 on a renovation doesn’t necessarily increase your home’s value by $20,000. Local buyer preferences, the quality of the work, and the housing market could all affect the result.
If you get a home equity loan or HELOC to pay for home improvements, the new loan could impact your equity. But home improvements may not automatically impact home equity on their own.
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