Home equity grows two ways: paying down the mortgage principal (amortisation) and property appreciation. For most households, home equity is the single largest component of net worth.
Equity can be tapped through a cash-out refinance, a home-equity loan (HEL, lump sum) or a home-equity line of credit (HELOC, revolving). All three add a lien on the home and risk foreclosure if payments stop.
Home Equity = Current Market Value − Outstanding Mortgage Balance
A homeowner whose property is now worth CHF 1.4m, with CHF 800k remaining on the mortgage, holds CHF 600k of home equity — a powerful borrowing base for renovations or investment.