Home equity

The value of ownership built up in a home or property that represents the current market value of the house less any remaining mortgage payments. This value is built up over time as the property owner pays off the mortgage and the market value of the property appreciates.

Investopedia Says:
Home equity represents one of the largest sources of net worth for most investors. Home equity can be borrowed against, through a home equity loan or home equity line of credit (HELOC).

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Home equity is the market value of a homeowner's unencumbered interest in their real property—that is, the difference between the home's fair market value and the outstanding balance of all liens on the property. The property's equity increases as the debtor makes payments against the mortgage balance, and/or as the property value appreciates. In economics, home equity is sometimes called real property value.

Technically, home equity has a zero rate of return and is not liquid. Home equity management refers to the process of using equity extraction via loans—at favorable, and often tax-favored, interest rates—to invest otherwise illiquid equity in a target that offers higher returns.

Home equity may serve as collateral for a home equity loan or home equity line of credit (HELOC).

See also

• Equity
• Home Equity Loan
• Ownership Equity

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