Equity

Equity is your ownership stake in the home. It grows in two ways:

1. Paying down your loan: Each mortgage payment reduces your balance, increasing equity
2. Home appreciation: If your home's value rises, your equity increases even without making extra payments

Equity is powerful. It can be accessed through a cash-out refinance or home equity line of credit (HELOC) to fund renovations, pay for education, or invest. It's also your profit when you sell.

Building equity is one of the key reasons homeownership is considered wealth-building — you're paying yourself, not a landlord.