Definition: In real estate, equity is the owner’s financial interest in a property: its market value minus the debts secured by it.
Example
A home is worth $350,000 and has a $220,000 first mortgage and a $20,000 second mortgage. The owner’s equity is $110,000.
Keep the distinction clear
Equity changes as property values and secured loan balances change. It is not the same as cash in the bank, and selling costs can reduce the cash an owner receives from a sale.
Related terms
Loan-to-Value Ratio (LTV) · Down Payment · Principal
Keep studying
Loan-to-Value, Down Payments, Equity, and PMI
References: Freddie Mac: Understanding home equity
Pronunciation (US): EK-wuh-tee (capitals show stress)
Pronunciation reference: Merriam-Webster
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