Falling Debt, Rising Equity

When you purchased your home, you probably made a small down payment and borrowed the rest of the money you needed to buy it. Then you paid back your “forward” mortgage loan every month over many years. During that time:


• your debt decreased; and

• your home equity increased.

As you made each repayment, the amount you owed (your debt or “loan balance”) grew smaller. But your ownership value (your “equity”) grew larger. If you eventually made a final mortgage

payment, you then owed nothing, and your home equity equaled the value of your home. In short, your forward mortgage was a “falling debt, rising equity” type of deal.