Equity is the portion of your home’s value that you own. It’s calculated by subtracting the balance of your mortgage and any other loans secured by the home from its current market value.
Your equity grows in two ways: by paying down your mortgage and by your home’s value increasing over time. The more equity you have, the more financial flexibility you may have when selling your home, refinancing your mortgage, or borrowing against your home’s value through products such as a home equity loan, a home equity line of credit (HELOC), or a reverse mortgage (FHA-insured HECM or proprietary).