Mortgage Glossary
Equity
The portion of your home's value that you actually own — the difference between what it's worth and what you still owe.
What It Means
Equity is your ownership stake in the home. It grows in two ways:
- Paying down your loan: Each mortgage payment reduces your balance, increasing equity
- Home appreciation: If your home's value rises, your equity increases even without making extra payments
Equity is powerful. It can be accessed through a cash-out refinance or home equity line of credit (HELOC) to fund renovations, pay for education, or invest. It's also your profit when you sell.
Building equity is one of the key reasons homeownership is considered wealth-building — you're paying yourself, not a landlord.
Real-World Example
"Your home is worth $450,000 and you owe $280,000. Your equity is $170,000. If you sold today, you'd pocket $170,000 (minus selling costs)."
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Definitions are for educational purposes only and do not constitute financial or legal advice.