What Is Home Equity?

Home equity is the value of a homeowner's current stake in their home. In other words, equity is how much of the home you own (versus how much the lender owns). Home equity is calculated based on the market value of the home minus the amount of mortgage still outstanding. Therefore, the value of home equity increases as payments are made on the mortgage and adjusts based on market forces that affect the current value of the property. The faster you repay the value of your mortgage, the quicker you will "build up" equity in your home.

Home equity is an asset, so it is calculated as a part of your total net worth. You can use your equity for additional loans or credit once you have built up sufficient equity in your home.