Home Equity
Definition
The portion of your home you own outright. Home value minus mortgage balance equals equity. If your $500,000 home has a $300,000 mortgage, you have $200,000 equity. You can borrow against it via HELOC or home equity loan.
Why It Matters
Home equity is locked-up wealth, but you can access it cheaply via a HELOC (home equity line of credit). For home improvements or paying off high-rate debt, a HELOC at 6% is cheaper than credit cards at 18%.
Example
Own $500,000 home with $300,000 mortgage. You have $200,000 equity. Establish a HELOC and borrow $50,000 at 6% to renovate. Renovations increase home value to $550,000. Now you have $250,000 equity and improved home.
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Pulsafi definitions are sourced from primary regulatory and industry references. See our methodology and data sources.