Building equity into your home is one of the best ways to build wealth. In fact, many Americans are now planning to retire with the help of reverse mortgage, now that the social security and welfare system are almost bankrupt. It is important for a new investor to understand what home equity is and how it works.

Savings Account: Home equity can be considered like a savings account. The bad part is that the first few payments that you make towards this account are almost exclusively towards interest. The good part is that payments to this account have major tax breaks involved.  Over time, this savings account would have paid much more than any CD or treasury bill would have.

How It Grows And Diminishes: There are two sources of growth for your home equity. Either you put money into it or the market does. Every time you make your monthly payment, a part of it goes towards this account. This is fairly simple to understand.

The market contributes to home equity when the house appreciates or depreciates in value. Let