Equity is the portion of your house that you own, mortgage-free. You can calculate your equity as follows:

1. Determine the current value of your home. This amount may be higher, and in some cases, much higher, than the amount you paid for it. The value may also be lower than what you paid if the house was overvalued when you bought it or if the real-estate market in your area has slumped.

A mortgage company requires an appraisal, done by a professional, to determine this value, but you can guess, based on what homes in your neighborhood have been selling for.

2. Determine the current payoff on your mortgage. If you don't receive a monthly statement or receipt that tells you the payoff amount, call your mortgage company and ask for it.

3. Subtract the payoff from the current value. This is the equity in your home.

Instead of calculating the current value of your home, some lenders use the value when you bought the home. If that was more than a couple of years ago, the current value may be much higher.