Equity Guide

How Much Equity Do I Need?

It depends on what you are doing. Purchases can start with as little as 3–5% down. Avoiding PMI usually means 20% equity. Cash-out refinances and investment properties typically require more. Here is how lenders think about loan-to-value.

Get Pre-Approved Conventional Overview

Equity Targets by Goal

Equity is simply home value minus what you owe — lenders express it as LTV.

{[ ["Buy with low down payment", "Conventional purchases can start around 3% down for eligible first-time buyers or 5% for many others — with PMI."], ["Avoid or remove PMI", "Roughly 20% equity (80% LTV) is the classic threshold to avoid PMI or request removal."], ["Rate-and-term refinance", "Can often go above 80% LTV, though PMI may apply on the new loan."], ["Cash-out refinance", "Primary homes often max near 80% LTV; second homes and investments usually need more equity."], ["Investment purchases", "Expect higher down payments — commonly 15%+ — so you start with more equity day one."] ].map(([title, desc], idx) => (

))}

How Lenders Measure Equity

Appraised value and payoff timing determine the equity lenders will recognize.

  • Purchase LTV uses the lower of purchase price or appraised value
  • Refinance LTV is based on the current appraised value in most cases
  • PMI cancellation has specific original-value vs current-value rules
  • Second liens and HELOCs count toward combined LTV (CLTV)
  • Rapid appreciation still needs an appraisal to unlock refinance equity

Quick Equity Benchmarks

These are common planning numbers — your scenario may differ with credit and occupancy.

  • 3–5% down: purchase possible with PMI for many buyers
  • 10%+ down: common for second homes
  • 15–25% down: typical investment property range
  • 20% equity: PMI avoidance / removal planning target
  • 20%+ remaining equity: common cash-out ceiling on primary homes

How to Build or Unlock Equity

Equity grows through payments, appreciation, and improvements — then financing unlocks it.

{[ ["Know your numbers", "Estimate value and payoff to calculate current LTV."], ["Match the product", "Purchase, rate-and-term, or cash-out each have different equity needs."], ["Plan for PMI", "If under 20%, understand monthly PMI and future removal timing."], ["Confirm with an appraisal path", "We order valuation when it is time to refinance or remove PMI."] ].map(([t, d], i) => (

Step {i + 1}

))}

Keep Exploring

Related guides to help you compare options and move toward pre-approval.

Conventional Loan Down Payment

How little you may need to buy with conventional financing.

When Can PMI Be Removed?

Equity thresholds for canceling mortgage insurance.

What Is a Cash-Out Refinance?

Using equity for cash while refinancing.

Get Started

Check your equity options with Ryan or Steve.

2MG Daily

Related Blog Posts

Recent articles from our blog on conventional loans, credit, and homebuying.

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Frequently Asked Questions

Not Sure How Much Equity You Need?

Share your goal — buy, drop PMI, or cash out — and Ryan or Steve will translate it into a clear LTV target.

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