Home Equity: What is It and What Can You Do With It?


When many buyers consider grabbing a property, they often don’t have the full picture of everything this purchase opens them up to. From adding value over the lifetime of them owning the home to gaining equity that allows property owners to invest back in their property while they own it: there’s a lot to keep in mind.


These are the top things to know about home equity and what you can do with it.

What is Home Equity?

Your home equity is the value of the interest that’s been paid into your home. In simple terms, it’s the amount of your property that you own since you’ve paid off this percentage of your loan.

This is a great way to get money upfront that you’d only be able to see otherwise if you were to sell your property, which gives you a chance to do a lot with the money you wouldn’t be able to touch otherwise. 

Does it Grow Over Time?

Yes! The amount of equity owners have in their properties can grow over time. This comes from your down payment, the increase in your home’s market value, and from your monthly payments on your property.

Although this might seem complicated, there are many ways a lender may calculate your property’s equity: so if you don’t agree with their numbers, it’s okay to go to another lender and ask what they think.

What Can I Use It For?

Home equity can be used in dozens of ways. Although some may not consider this part of home ownership when asking themselves, ‘should I rent or buy a home?’ It’s a fantastic perk to think about.  

This is a loan that can be used for anything from college costs to debt consolidation: but the best idea is to use it for home improvements. Using your equity to build more value into your home ensures you’re investing it wisely and will eventually be able to cash in on the money you’re borrowing from yourself.

This can be anything from expensive updates like replacing your roof to changing your windows and swapping out siding. Instead of getting a payment plan from the seller, cash in on your investment in your property.

Why’s It Important to Be Careful With It?

Although you may feel like your home equity is free money: it’s a loan against the amount you’ve paid off on your property. Taking out a loan you don’t need or not making payments on time after you’ve been lent the money can quickly hurt your credit score and put your home in danger. You’re borrowing against your property, and although it’s a fixed interest and secured loan: you don’t want to mess this up. This can quickly tank your credit card and make monthly payments unwieldy.

Your Home Equity Is Important

You’ve worked hard to buy a home and put in the work to make it your own: home equity gives you the chance to be able to afford further changes and updates you might need. Borrow wisely, and make your home the best it can be.