Home equity
The portion of your home's value that you actually own — current market value minus what you still owe.
If your home is worth $500,000 and you owe $320,000 on the mortgage, you have $180,000 of equity. Equity grows three ways: principal payments (forced savings), home appreciation (market gains), and improvements that raise market value (renovations). It's the largest chunk of net worth for most US households. You can tap it via a HELOC, home equity loan, cash-out refinance, or by selling — but unrealized equity isn't liquid wealth, so don't budget on it for emergencies.
Related
- HELOC (Home Equity Line of Credit) — A revolving credit line secured by your home's equity, with variable rate and a typical 10-year draw period.
- LTV (Loan-to-Value) — Loan amount divided by home value, expressed as a percentage.
- Refinance — Replacing your existing mortgage with a new one — usually for a lower rate or different term.