Home Equity

Banking & Credit

Home equity is the portion of your home's market value you actually own — the appraised value minus what you owe on the mortgage. A $500,000 home with a $300,000 mortgage has $200,000 of equity. Equity grows through mortgage paydown (slow early due to interest-heavy amortization) and home appreciation (typically 3-4% annually long-term). You can tap equity through a home equity loan (lump sum, fixed rate), HELOC (line of credit, variable rate), cash-out refinance, or reverse mortgage (age 62+). Treat home equity carefully — it's not liquid until you sell, and borrowing against it puts the home at risk.