When you make a down payment of $80,000 on a $400,000 home, you start with $80,000 in equity. As you pay down the mortgage and (typically) the home appreciates, equity grows.

Equity can be tapped through a HELOC, home equity loan, or cash-out refinance. It's also realized when you sell the home — equity equals the sale price minus selling costs and remaining mortgage.

Building equity is one of the main wealth-building benefits of homeownership compared to renting.