08/30/2026
Home Equity Explained: What It Is and Why It Matters
It is often said that homeownership builds wealth. So, what is home equity, and how can it enhance your net worth?
What is home equity?
Building home equity is a bit like investing in a long-term instrument, like bonds. Your money is, for the most part, locked up and not spendable. There are some ways to tap it, but wealth is created over years as your share of “free and clear” ownership of the house increases.
Home equity, by definition, is the current market value of your home, minus what you owe. You’re looking for a positive number there. Any gain comes from:
Paying down the principal on your loan
An increase in market value over time
It seems simple enough, but it’s not guaranteed. Just ask any homeowner who went through the most recent housing bust. When a housing bubble bursts, home equity can be an elusive concept, especially in underperforming housing markets, or if considered over the short term.
If you have any questions about your specific situation, Feel free to reach out.
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