What does it mean to have "equity" in a property?

Having "equity" in a property refers specifically to the difference between the market value of the property and the outstanding mortgage balance. This value represents the portion of the property that the owner truly owns, free of any debt. For instance, if a home is valued at $300,000 and the owner owes $200,000 on the mortgage, the equity in the property would be $100,000.

This definition highlights the owner's financial interest in the property, which can increase as the market value rises or as mortgage payments reduce the outstanding balance. It is a crucial concept in real estate, as it impacts the owner's ability to leverage their investment, sell the property, or take out additional loans against it.

Other options touch on aspects of property value and ownership but do not accurately encapsulate the precise relationship that defines equity. For example, the total amount paid for the property, including renovations, does not take into account the current mortgage balance, and simply listing the market value or percentage owned does not consider existing liabilities, thereby failing to provide a complete picture of what equity truly means.