Definition
Equity represents the ownership interest in an asset after deducting all liabilities associated with that asset. In real estate, it is the difference between the property's current market value and the remaining mortgage balance. In investing, equity refers to ownership shares in a company (stock).
Formula
For home equity: subtract your current mortgage balance from your home's current market value. For shareholder equity: subtract a company's total liabilities from its total assets.
Example
Home Equity Example
If your home is worth $450,000 and your remaining mortgage balance is $280,000, your home equity is $170,000. As you pay down your mortgage and/or your home appreciates in value, your equity increases. You can access this equity through home equity loans, HELOCs, or cash-out refinances.