What is home equity?

You may be able to borrow money using your home as security. Your coaches explain.

CassieOwning a home is an investment because homes generally increase, or appreciate, in value. As the years go by and you pay your mortgage down, you may have more and more home equity.

AliciaEquity is the difference between how much your house is worth and how much you still owe for it. This means you may be able to borrow money using your home as security.

CassieSome reasons you may want to borrow against your home include investing in college education, paying off high-interest debts, and paying for other major expenses.

AliciaIf you do borrow against your home’s equity, be sure to make your loan payments on time and in full. Otherwise, you may risk losing your home. Use this ability to borrow wisely, and you’ll have a whole new level of flexibility to achieve your financial goals.

Click the Next button to compare two ways of using your home as collateral — an asset that allows you to borrow money.