What does the term "equity" mean concerning property ownership?

Equity in the context of property ownership refers to the difference between the property's current market value and the outstanding mortgage balance on it. This means that equity represents the portion of the property that the owner truly "owns" outright, without any liens or encumbrances from mortgage debt. For example, if a home has a market value of $300,000 and the mortgage balance is $200,000, then the equity in the home is $100,000.

This understanding of equity is crucial for homeowners, as it affects their net worth and can influence their ability to refinance, take out home equity loans, or sell the property. The other options do not accurately capture the concept of equity, as they either describe value in a different context or do not account for the obligations of the homeowner.