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Equity
Definition
Equity is the ownership value in an asset after subtracting any debts or liens associated with it, or the value of ownership in a company.
Explanation
For a home, equity is the current market value minus the mortgage balance. For stocks, equity represents ownership shares in a company. In business accounting, equity (or shareholders' equity) is the company's total assets minus total liabilities.
Building equity in your home through mortgage payments and appreciation is a primary wealth-building strategy. Home equity can be accessed through refinancing or home equity loans.
Example
A home worth $400,000 with a $280,000 mortgage gives the owner $120,000 in equity (30% of the home's value).