A house is worth $500,000 and the mortgage balance is $320,000. The owner’s equity is $180,000. Equity is the difference between the property’s current value and the debt owed against it.

Equity grows as the owner pays down principal and as the property appreciates. It shrinks if values fall or if the owner borrows against the property through a home-equity loan or cash-out refinance. Homeowners tap equity for renovations, education, or other needs, while investors track equity as a measure of wealth building.

Lenders look at equity when evaluating refinance or home-equity applications. Low equity raises risk of being underwater if prices decline. Building equity is one of the primary financial benefits of owning real estate over time.

• Difference between property value and outstanding debt
• Increases with principal paydown and appreciation
• Can be accessed through refinance or home-equity products
• Represents the owner’s stake in the property