Definition
Equity is the difference between a home value and the amount owed on the mortgage.
If you are comparing mortgage options, treat equity as one piece of the total cost and risk picture, not a standalone detail.
Why It Matters
Equity matters because it affects refinancing, PMI cancellation, selling proceeds, and borrowing options.
Simple Example
If a home is worth $450,000 and the mortgage balance is $330,000, equity is about $120,000.
How to Use This Term
When you see equity on a loan estimate, calculator result, or lender conversation, connect it to three practical questions: how it affects monthly payment, how it affects cash needed now, and how it affects flexibility later.