Yes, home equity is part of your net worth. Net worth is what you own minus what you owe, and the portion of your home you’ve paid off sits on the “own” side alongside your bank accounts, retirement funds, and other property. For most American homeowners it’s the largest single line on that balance sheet.1Consumer Financial Protection Bureau. What You Should Know About Home Equity Lines of Credit The wrinkle worth knowing about: several federal programs use their own definition of net worth that strips home equity out, and one of them can catch you at a bad moment.
Figuring the Equity Number You’ll Add In
The formula is current market value minus everything you owe against the property. If the house is worth $450,000 and you owe $280,000, your equity is $170,000.
For market value, a licensed appraiser gives you the most defensible figure and is typically required if you’re borrowing against the home or settling an estate. A real estate agent’s comparative market analysis costs nothing and uses recent nearby sales. Online estimators are a rough starting point.
For the debt side, pull your most recent mortgage statement, but know that the balance shown isn’t necessarily what would satisfy the loan. Your payoff amount includes accrued interest to the payoff date and can differ from the statement balance.2Consumer Financial Protection Bureau. What Is a Payoff Amount and Is It the Same as My Current Balance? You can request a formal payoff statement from your servicer for the exact figure.
Include every lien on the property, not just the first mortgage. A home equity line of credit or a second mortgage reduces your equity too. HELOCs are easy to miscalculate during the draw period (usually the first 10 years) when you may be paying only interest, so the principal balance sits flat or grows as you borrow more. Whatever is outstanding on that line right now is what comes off your equity.
Slotting Equity Into Total Net Worth
Once you have the equity figure, add it to the rest of your assets: cash, investments, retirement accounts, vehicles, and any other property with resale value. Then add up your liabilities: credit cards, student loans, auto loans, medical debt, personal loans, and any other obligation you haven’t already accounted for. Subtract the liabilities from the assets and you have net worth.
One trap. You already subtracted the mortgage when you calculated home equity. Don’t subtract it again in your liabilities column, or you’ll count that debt twice and understate your net worth.
The number moves constantly. Home values shift, mortgage balances shrink with each payment, and your other accounts change daily. Financial planners generally suggest recalculating at least once a year so you can see whether you’re actually building wealth over time.
Paper Equity Isn’t the Same as Cash
The equity figure on your balance sheet isn’t what would land in your bank account if you sold tomorrow. Sellers typically pay somewhere between 6% and 10% of the sale price in combined transaction costs, including real estate agent commissions, transfer taxes, title insurance, and closing fees. On a $450,000 sale, that’s roughly $27,000 to $45,000 gone before you see a dollar. States without transfer taxes and with lower commission rates fall closer to the bottom of that range, but it’s never zero.
Standard practice is still to list equity at full value on your net worth statement. The adjustment matters when you’re planning around that equity, whether that’s funding retirement, starting a business, or making a major purchase. The gap between paper equity and net cash proceeds is one of the more common blind spots in personal financial planning.
When Federal Rules Leave Home Equity Out
Several federal programs use “net worth” in a narrower sense than the household balance sheet does. If any of these apply to you, home equity behaves differently than the general rule.
The Accredited Investor Test
Under SEC Rule 501 of Regulation D, you qualify as an accredited investor (which unlocks access to private equity, hedge funds, and other unregistered offerings) if your net worth exceeds $1 million, but the rule explicitly excludes the value of your primary residence from that calculation.3SEC. Accredited Investors So if you have $600,000 in investments and retirement accounts and $500,000 in home equity, your total net worth is $1.1 million, but your accredited investor net worth is $600,000. You don’t qualify. The rule is designed to keep people from leveraging their homes into speculative investments.
The same distinction shows up in less formal contexts. Some lenders care more about your liquid assets than about equity locked in a house, because you can’t quickly convert a home into cash.
Medicaid Long-Term Care
Medicaid covers nursing home care only if your countable assets fall below strict limits, and home equity gets its own separate cap. For 2026, the federal government sets a home equity floor of $752,000 and a ceiling of $1,130,000, and each state picks a limit within that range.4Centers for Medicare & Medicaid Services. 2026 SSI and Spousal Impoverishment Standards Equity above your state’s chosen limit disqualifies you from Medicaid-funded nursing home coverage until you reduce it, typically by selling or borrowing against the home. A spouse or dependent still living in the home can trigger exceptions.
Supplemental Security Income
SSI takes the opposite approach. The Social Security Administration excludes your primary residence from countable resources entirely, regardless of value, as long as you live there. A million-dollar house doesn’t disqualify you from SSI if it’s your principal place of residence. The moment you move out without intending to return, it becomes a countable resource. There’s an exception for people fleeing domestic abuse: SSA continues to exclude the home until the person establishes a new principal residence. If you sell an excluded home, the proceeds stay excluded for three months, but only if you intend to use them to buy another home and actually do so within that window.5Social Security Administration. 20 CFR 416.1212 – Exclusion of the Home
When Equity Is Negative
Equity isn’t always positive. If your home’s market value drops below what you owe, you’re underwater. A home worth $300,000 with a $360,000 mortgage means negative $60,000 in equity, and that number drags your net worth down because you still owe the full loan balance on an asset that can’t cover it.
Negative equity makes it hard to sell without bringing cash to closing and limits your ability to refinance. It also makes your paper net worth look worse than day-to-day life feels, since the loss is only realized if you actually sell. Home values may recover if you can hold the property and keep making payments. For a snapshot of net worth at any given moment, though, the formula still holds: market value minus debt, even when the answer is below zero.