What is equity in real estate?

Equity is your percent ownership of your home. Over time as you make mortgage payments and pay down your home loan, you increase your percent ownership of the home. Appreciation in home value also contributes to an increase in equity.

Why is equity awesome? It is the result of your investment in your home, and if you ever choose to sell your home down the road, you can profit this equity back. You can also get a loan based on the equity of your home if you ever needed extra money for life expenses, such as medical bills, college tuition or home repairs (though not recommended to do so if you plan on selling your home soon).

For example, let’s say 5 years ago you purchased your home for $250,000, and your current loan balance is $210,000. It’s appraised value is now $285,000, so in order to calculate your equity you would take the appraised value and subtract your loan balance. 285,000 - 210,000 means your equity is $75,000!

Home ownership is such a powerful tool for building wealth because it allows you to build equity. Have any questions about equity? Feel free to message me here. I’m always happy to help! 


Written by Blair Hayes, REALTOR®