Legal Definitions - home equity

Home equity refers to the value of a homeowner's ownership interest in their home. It is calculated by subtracting any outstanding liens or debts on the property from its current market value.

For example, if you bought a house for $300,000 with a mortgage loan and have paid off $100,000 of the loan, your home equity would be $100,000. This means that you own one-third (or 33.33%) of the property, while the lender still has a two-thirds (or 66.67%) interest in the house until the loan is fully paid off.

The amount of home equity you have can change over time due to various factors, such as changes in the local real estate market or improvements you make to the property that increase its value.

Having home equity can be beneficial for homeowners, as it can be used as collateral for loans or lines of credit, or as a source of funds for major expenses like home renovations or college tuition.