August 31, 2007, Newsletter Issue #145: How Equity Changes

Tip of the Week

Because equity is based on your home's value and the amount you owe, the amount of equity in your home will vary as those two factors change. So, if the real estate market in your area goes up, raising your home's value, your equity goes up. Conversely, if the market declines, your equity goes down. Each time you make a mortgage payment, part of the payment goes to pay down the principal amount, which raises your equity by that amount. If you take out a home equity loan or 'second mortgage,' your equity is decreased by the amount of the loan.

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