Definition
The portion of your home you actually own: market value minus everything owed against it. It grows three ways, paying down the mortgage, price appreciation, and improvements, and it can be borrowed against through a HELOC, home equity loan, or cash-out refinance.
Why it matters
Equity is many households' largest single asset and the anchor of their net worth, but it is illiquid: spending it requires borrowing, selling, or time. Tracking it matters for dropping PMI, refinancing decisions, and knowing what a sale would actually put in your pocket.
Example
A home worth $450,000 with a $280,000 mortgage balance holds $170,000 of equity. The owners can request PMI removal, and a lender might extend a HELOC against part of the equity, but turning all of it into cash means selling and paying transaction costs.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.