What is equity in real estate?

Equity in real estate refers to the difference between the property's market value and the outstanding mortgage balance. This concept is crucial for property owners because it represents the actual value or ownership interest that they have in the property.

For example, if a property is valued at $300,000 and the mortgage balance is $200,000, the equity would be $100,000. Equity can increase over time as property values rise or as the mortgage balance decreases through payments. Understanding equity is important for homeowners and investors alike, as it can influence decisions regarding refinancing, selling, or leveraging the property for additional investments.