Definition
Home equity is the portion of your home's value that you actually own. It's calculated by subtracting your remaining mortgage balance from the home’s current market value.
Understanding Home Equity
Equity comes into play when you make a down payment or as your home's value changes. In simple terms, it's the part of your home that you truly 'own.' Example: If your home is worth $300,000 and you owe $200,000 on your mortgage, your equity is $100,000. Equity can grow as you pay off your mortgage or if your home increases in value. It's not the same as cash savings; it represents an asset value. People often confuse it as instant cash, but converting equity typically involves selling the home or refinancing.
