When you include a down payment with your mortgage loan to pay for a new home, those funds you included are your investment in your home. In order to reduce your mortgage payment as much as possible, your down payment is perhaps as large as you could afford. For most home buyers, the down payment is a great deal of money.
Every monthly mortgage payment you make includes principal, which is the amount that goes directly to the purchase price of the home. That principal is added to your down payment to create the funds you have applied to the cost of your purchase. In totality, this is your “equity” in the home.
