What is home equity?

Equity is the difference between the market value of your home and the amount you owe the lender who holds the mortgage. Your equity is the money you'd receive after paying off the mortgage if you were to sell the home.

How to build equity

You can build equity by:

• Paying your monthly bond payments - and a little more Every payment you make goes toward reducing what you owe and increasing your equity, by adding a little extra on a payment or two throughout the year you are growing it faster.

• Doing renovations Imagine using your bonus at the end of the year to do a bathroom remodel, this not only increases your home's value it also increases your equity stake.

• Making a larger down payment. The more you put down, the smaller your loan balance will be—meaning more home equity. You can experiment with the effect by using our bond calculator.

You can lose equity by increasing your loan amount, reducing the value of the house through disrepair or damage, or being exposed to disfavorable market changes.

Building equity allows you to see more of a return on your investment when it's time to sell your house.