What does the term "home equity" refer to?

The term "home equity" refers to the difference between the property's market value and the mortgage balance. This concept is crucial for homeowners as it represents the portion of the property that the owner truly owns outright, free from any mortgage obligations. For instance, if a home is valued at $300,000 and the owner owes $200,000 on the mortgage, the homeowner has $100,000 in equity.

Home equity can increase over time as property values rise or as the homeowner pays down the mortgage. This equity can be tapped into through various means, such as home equity loans or lines of credit, often allowing homeowners to leverage their investment for further financial needs. Understanding home equity is essential for anyone involved in real estate, whether buying, selling, or refinancing a home.