Home equity refers to the difference between the current market value of a property, and the cost to sell the home- any outstanding balance on any mortgage or other liens on the property plus the fees in selling real estate. It represents the owner's financial interest in the property. Homeowners can build equity over time as they pay down their mortgage or as the property's value increases. The biggest factor in home equity today are appreciation years, market shifts, and market trends.
The home value is the estimated value of the property in the current market, while equity is the owner's financial stake in the property, taking into account the outstanding mortgage balance. While an increase in home value can contribute to increased equity, changes in equity can also be affected by factors such as property improvements, appreciation years, as well as paying down the mortgage principal or taking out additional loans against the property. Understanding both concepts is crucial for homeowners to assess their overall financial position and make informed decisions about their property.