Equity in the context of real estate refers to the difference between the current market value of the property and the outstanding balance of any mortgage or other debt secured by the property.
In other words, it represents the portion of the property that the owner truly owns outright without any associated debt.
For example, if a home is valued at 300 K and the homeowner still owes 200 K on their mortgage and their equity in their property is 100.
Kate 300 K -200 K equity can increase in several ways. Property appreciation.
When the market value of the property increases over time, the homeowners equity grows. Number two, mortgage payment.
As the homeowner makes mortgage payments, the reduce amount of debt owed increases their equity.
Equity is an important factor asset for homeowners as they can be leveraged for things like home equity loans or as a source of wealth when selling the property.
