Equity

Equity is the difference between your home's current market value and the amount you still owe on your mortgage. It represents the portion of your home you actually "own."

Calculating Equity: Home Value - Mortgage Balance = Equity

Example:

• Home value: $400,000
• Mortgage balance: $250,000
• Equity: $150,000

  How Equity Builds:

  Through payments:

Each mortgage payment reduces your principal, increasing equity.

Through appreciation: If your home's value increases, so does your equity.

Through improvements: Renovations can increase home value and equity (not guaranteed).

Accessing Your Equity:

Home equity loan:

• Lump sum, fixed rate
• Second mortgage on your property

  HELOC (Home Equity Line of Credit):

• Revolving credit line
• Variable rate
• Draw as needed

  Cash-out refinance:

• Replace mortgage with larger loan
• Receive difference in cash

  Using Equity Wisely:

Common uses include:

• Home improvements
• Debt consolidation
• Education expenses
• Emergency fund

  Risks of Tapping Equity:

• Your home is collateral
• Market values can decline
• Additional debt to repay
• Potential foreclosure if you can't pay

  Negative Equity:

When you owe more than your home is worth (being "underwater"). This can happen if home values decline significantly.