What is home equity? Many homeowner’s see equity building as one of the biggest reasons to own a home. Simply put, equity is the amount of the house that you actually own. This can be figured out by finding the difference between the amount you owe on your mortgage and the market value of the home. If you decide to sell your home your lender, your payment will equal the amount of equity you have in the home.

Your equity will rise in conjunction with the value of your home. This can happen if your home value goes up either because of the market or because of changes you made to the home. For instance, if you upgrade you’re heating or cooling systems you would be adding value to your house, as well as equity to your investment.

Building equity is a great way to beef up your financial profile. Equity is an asset that will increase as you pay down your mortgage. Keep in mind that if the balance on a borrower’s loan is larger than current market price of their home, then they will end up with negative equity.

Amortization schedule
The amortization schedule is a table that breaks down each one of your monthly mortgage payments based on the length of the mortgage. This table will show you different payment options and what your balance is after each payment. Many times homeowner’s can quickly build equity by paying down their balance faster. You can use an amortization table to see whether it’s worth it to refinance or make extra payments.

Savings
When you invest money into an asset you are building equity, and that’s as good as money in the bank. Many homeowner’s like to look at their mortgage payments as savings in the form of home equity instead of cash. By making payments every month you will be growing the amount of cash you’ll have available through your home.

How can you use your home equity?
You may be curious to know what you can do with your home equity. If you sell your home you can get cash or other forms of compensation. Basically home equity is a tradable asset. You may want to use the equity you’ve built up in your home to help fund the purchase of a new house. Another common use of equity is to secure a second mortgage. Borrowers can take out home equity loans or home equity lines of credit.