If you own a home or plan to own a home, you may have heard people talk about “home equity.” Here in Canada, we have options to build our equity as an asset or even to borrow against it to achieve other financial goals. But how can you do this without understanding how home equity works?

Defining Home Equity

If you want to make it quick, you can turn to the dictionary definition of equity, but unless you’re familiar with other real estate terms, you’ll be more confused than when you started. I’m going to dig a little deeper to break this term down for you.

The short answer is that home equity describes the portion of your home that you truly “own”. While it’s true that you are considered the homeowner as soon as you have purchased the home, if you borrowed money to buy it then your lender still has interest in the home until you’ve paid off your mortgage. This means that your equity is the amount that you, as the buyer, have paid yourself. This includes your down payment! Your equity changes with each payment you make.

For a long answer, you can go here to learn all about how equity can change, as well as getting a concrete example of how it works.

Calculating Home Equity

If you’re interested in determining what your equity is at, you can take the current market value of your home and subtract whatever you still owe. This sounds easy, but if you have a hard time keeping track of numbers like this, these tips can help with your calculation!

It’s no surprise that in order to gain home equity, you need to first buy a home. If you want to work with a realtor who is committed to your home search, you can give me a call today at (306) 281-8883 or check out my website! I’d love to help you make your dreams come true.