You own your home when you buy it, of course, but until you’ve paid off your mortgage, the bank has an interest in your home. In other words, the bank holds your home as collateral on your loan; if you fail to pay, the bank can take your home.
But as you pay down your loan – and as the value of the property hopefully rises – you build what’s called “equity” in your home. In simplest terms, The Balance says, equity is the portion of the property you actually “own.” Investopedia calls equity the “value of the homeowner’s interest in their home.”
How do you figure out how much equity you have in your home? Subtract the liens on your home (such as your mortgage) from the current market value of your property. This number will change over time as the value of your home fluctuates and you make payments on your loan.