What is Equity?

If you are familiar with the phrase home equity loan, but not quite sure what equity is, here is a brief explanation:

• In finance, equity is the   residual claim or interest of the most junior class of investors in an asset, after all liabilities are paid. Source: Wikipedia
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• The value of a house and/or property minus the homeowner’s outstanding mortgage balance. An example of this in numbers is as follows: If John’s Home is worth $200,000 and he owes $100,000 on his mortgage, he would have $100,000 in home equity.

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