What is Home Equity?
Summary: Home equity is the difference between how much you owe on your mortgage and how much your home is worth. You can contribute to the equity within your home by assessing its value. Certain factors can impact equity such as home values increasing or paying off your mortgage. To calculate the equity within your home, subtract your existing mortgage balance from the home value.
A quick way to assess equity is by tracking recently sold homes within your neighborhood.
The equity within the home can increase and/or decrease in two ways.
| Positive Impacts on Home Equity | Negative Impacts on Home Equity |
| Paying down mortgage amount | The value of your home goes down |
| Home value increases | Not paying your monthly mortgage |
Equity is an asset you can tap into with a cash-out refinance giving you access to a resource to make home improvements or lower debt. When your home appreciates, it grows in value. When your home grows in value, it directly impacts the equity. In addition to growing in value you can also build your equity by paying down your home mortgage loan. The less mortgage you owe, the more home you own. To know your home’s equity, you subtract the existing mortgage balance from the home value. For example:
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