What does the term "equity" mean in real estate?

The term "equity" in real estate refers to the difference between the market value of a property and the amount owed on it. In simpler terms, it represents the owner's interest in the property. When you own a home, equity increases as you pay down the mortgage and as the property appreciates in value.

For example, if a property is valued at $300,000 and the total amount owed on the mortgage is $200,000, the equity in the property would be $100,000. This concept is crucial for homeowners looking to understand their financial position and for lenders when determining how much they can lend against the property.

Understanding equity is essential for making informed decisions about selling, refinancing, or leveraging property, as it reflects the actual stake an owner has in their real estate investment.