If you’ve ever heard people talk about “building equity” or “using equity to invest,” it can sound a bit confusing — especially if you’re buying your first home.
But the good news? Home equity is actually really simple.
Here’s the easy breakdown.
1. Home equity = the part of your home you actually own
Equity is just the difference between:
Your home’s value minus what you still owe the bank.
For example:
- Your home is worth $600,000
- Your loan balance is $450,000
- Your equity is $150,000
The longer you own the home (and the more the value grows), the more equity you build.
2. How equity grows over time
Your equity grows in two main ways:
✔️ Your repayments — Every repayment chips away at the loan amount — increasing the part you own.
✔️ Market growth — If your home increases in value (even by a little each year), your equity grows faster.
This is why owning a home early can make a huge difference.
A $600k home growing at 6% per year becomes:
- $637k after 1 year
- $802k after 5 years
- $1.07m after 10 years
You’re building wealth without even realising it.
3. Why home equity matters
Equity is one of the biggest advantages of owning a home.
You can use it later for:
- Upgrading to a bigger home
- Renovating
- Investing in a second property
- Consolidating debts
Equity gives you options — and it’s the reason many people build wealth through property without saving huge amounts again.
4. How to start building equity sooner
The fastest way to build equity is simply to get into the market earlier — even if it’s with a starter home rather than your “dream home.”
Instead of waiting years to afford the perfect place, many buyers choose something comfortable, affordable and in a good growth area, then let time and the market do the heavy lifting.
The key is to start somewhere, own something, and give yourself time in the market, not just time watching the market.
