The portion of a home's value you own outright — the difference between the property's market value and what you still owe on the mortgage.
Full Definition
Home equity is the market value of your property minus all liens against it (primarily your mortgage balance). If your home is worth $500,000 and you owe $320,000, your equity is $180,000. Equity builds in two ways: through principal paydown (each mortgage payment reduces your balance) and property appreciation (rising market values increase the asset side of the equation). Equity represents real wealth that can be accessed through a home equity loan, HELOC, or cash-out refinance. It also serves as a cushion that protects both borrower and lender — negative equity (owing more than the home is worth) was a central driver of the 2008 foreclosure crisis.
Related Terms
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