Those of us who own their homes know that we've got it, but we don't always understand what it means or why it's so important. The term equity has many of us confused but really there's no need for that. Simply put, equity is the difference between the value of your home and what you still own on it. All the experts agree that this is one of the matters that should be at the heart of all you financial planning. It is one of if not the only way that some of us have of acquiring wealth.

There are many ways that you can borrow against your equity and if any type of emergency situation arises, it can come in handy against unexpected doctor's bills and the like. Remember too that having equity in your home improves your credit rating and this means that you'll be able to borrow more from a bank with better terms.

One of the tricks to getting this equity is having patience. Equity isn't something that you can build up overnight. Often it takes years of paying that mortgage down before you see any results, but once you get past the first five years of a mortgage, generally all the payments that you make after that start to make bigger dents in what you owe. As well, there is always an element of equity planning involved with any retirement plan as one of the goals there is to own your home with a small or no mortgage at all.

With this plan in place shelter for the remaining years of your retirement is guaranteed. A mortgage free home also takes the pressure off the need to use retirement income to pay for shelter. One of the other reasons to improve the equity in your house is so you can do the renovations that will further enhance your equity.