Understanding Home Equity

Home equity is the difference between the value of your home and the outstanding balance on your mortgage. It represents the portion of your home that you truly own and can use as collateral for loans and lines of credit. Here’s what you need to know about home equity.

How Home Equity Works

Home equity increases as you pay down your mortgage and as the value of your home increases. For example, if your home is worth $300,000 and you have a mortgage balance of $200,000, your home equity is $100,000.

Using Home Equity

You can use your home equity in a number of ways. One common way is to take out a home equity loan or line of credit, which allows you to borrow against the equity in your home. You can use the funds for home improvements, debt consolidation, or any other purpose.

Building Home Equity

There are a number of ways to build home equity, including making extra mortgage payments, making home improvements, and taking advantage of rising home values.


Home equity is an important concept for homeowners to understand. By building home equity and using it wisely, you can take advantage of the financial benefits that come with homeownership.

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