Equity
Quick Answer
Equity is the ownership value in an asset after subtracting any debts or liens associated with it, or the value of ownership in a company.
Definition
Equity is the ownership value in an asset after subtracting any debts or liens associated with it, or the value of ownership in a company.
Explanation
For a home, equity is the current market value minus the mortgage balance. For stocks, equity represents ownership shares in a company. In business accounting, equity (or shareholders' equity) is the company's total assets minus total liabilities.
Building equity in your home through mortgage payments and appreciation is a primary wealth-building strategy. Home equity can be accessed through refinancing or home equity loans.
Example
A home worth $400,000 with a $280,000 mortgage gives the owner $120,000 in equity (30% of the home's value).
Frequently Asked Questions
What is Equity?
Equity is the ownership value in an asset after subtracting any debts or liens associated with it, or the value of ownership in a company.
How does Equity work?
For a home, equity is the current market value minus the mortgage balance. For stocks, equity represents ownership shares in a company. In business accounting, equity (or shareholders' equity) is the company's total assets minus total liabilities.Building equity in your home through mortgage payments and appreciation is a primary wealth-building strategy. Home equity can be accessed through refinancing or home equity loans.
Can you give an example of Equity?
A home worth $400,000 with a $280,000 mortgage gives the owner $120,000 in equity (30% of the home's value).
Free Excel Templates
Also try our free Net Worth Tracker template
Calculate and track your net worth across assets and liabilities. Monitor growth over time with historical tracking and charts.
Download Net Worth TrackerAlso try our free Mortgage Amortization Schedule template
Create a detailed mortgage amortization schedule. See exactly how much principal and interest you pay each month over the loan term.
Download Mortgage Amortization Schedule