The longer you own your home, the greater your equity in the home becomes. But what does the term “equity” mean?
Think of equity as the difference between the fair market value of your home and the amount you have left to pay on the mortgage and other liens against the home. In other words, equity is the part of the property that you actually own. While you always truly own your home, the lender has an interest in your home as long as you owe on your loan.
Your equity in your home grows in two ways: As you make payments on your loan(s) and when the value of your property appreciates. Some homeowners choose to use their equity to make improvements, fund large purchases, or for other purposes through a home equity loan or a home equity line of credit (HELOC). When you sell your home, you can use your equity to buy your next home.
