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It is the cash value of your property over and above what is owed on it, including mortgages, liens, and judgments.

The amount of equity almost always grows in a home over the years, but it follows along with the economic times and cycle. Generally speaking, you can borrow against the equity that builds up in your home and use it for any number of reasons, including home improvements and to pay for college costs. During some economic climates, however, home equity loans can be more difficult to come by. Equity is also is a source of income for you once the home is sold.

Equity is also what makes seller financing possible. If you have money to spare, you can always lend some to the buyer and collect interest on it.

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