What is it ?
In: Economics
You buy your house for $200K. You make payments for a few years AND the value of your house goes up. 10 years later you owe $100K on your original loan and your house is now worth $300K. So your house is worth $200K more than you owe on it. That $200K is equity.
It is basically how much of your property (that is the house and the actual land that the house is on, which can be anything from like a very tiny backyard to several acres of land depending on the “parcel” or area that you bought) you actually own compared to how much the bank owns through your mortgage (home loan).
So say you buy a house for $500,000 ten years ago, and you paid off $100,000 so you owe $400,000 still on the mortgage. Your equity would be $100,000 ($500,000 minus $400,000). Imagine the property value actually increased in those ten years to $600,000. Your equity would be $200,000 ($600,000 minus the $400,000 you still owe to the bank).
Equity is a measurement of the value of something you own subtracted by the amount of the liabilities you have on that thing.
Say you took out a mortgage for a house that is valued at $300,000, but you still owe the bank $200,000. Your home equity is $100,000
Equity is how much of something that you own.
If you buy a car and you have made half of the total payments, you have 50% equity in that car.
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