What Does Equity Mean in Real Estate?

Real Estate Equity is the difference between the current market value of your property and the amount you owe to your lender on the mortgage. If you were to sell the home, the equity would be the money you would receive after you pay off the loan. For example, if the market value of your home is $500,000 and you owe $400,000 on the mortgage, your equity is $100,000 or 20%. When you make your loan payments, you are building equity by paying on the principal, while also paying the interest on the loan and any insurance and tax payments. Over time, you will have 100% equity in your home.