Equity is also a term in finance and is broadly defined as an ownership share of an asset. For example, an investor could purchase shares of stock in a company or in the case of Low Income Housing Tax Credits (LIHTC), an investor could purchase an equity stake in a housing development. In the context of homeownership, equity is 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 (debt). This value is built up over time as the property owner pays off the mortgage and the market value of the property appreciates.
This Jargon Buster was contributed by the Federal Reserve Bank of San Francisco.
