Home equity is the homeowner's financial interest in their property, calculated as the difference between the property's current market value and the total outstanding balances of all loans secured by the home.

In the United States, it is a major source of wealth accumulation with the majority of middle class wealth being held in home equity which totals over $35 trillion overall.

Home equity is defined as the market value of a homeowner's unencumbered interest in their real property, that is, the difference between the home's fair market value and the outstanding balance of all liens on the property. It is summarized by the accounting identity, value − debt = equity. In economics, home equity is sometimes called real property value.

Homeowners acquire equity in their home from two sources. They purchase equity with their down payment and the principal portion of any payments they make against their mortgage. Definitionally, this results in the immediate creation of home equity in the amount of the down payment at the time of purchase with equity increasing with each payment (in cases of standard amortizing loans). The property's equity increases as the debtor makes payments against the mortgage balance.

Equity also increases as the property value appreciates as the value of the property increases while the debt remains unchanged. Conversely, home equity may decrease on a property should valuations decline. In extreme cases, this can result in negative equity, often referred to as mortgages which are "underwater" or "upside down". In 2012, approximately 20% of mortgage holders were underwater; negative equity was most concentrated in Nevada where 61% of mortgages were upside down. Arizona (48%), Florida (44%), Michigan (35%), and Georgia (33%) also all showed a high percentage of homeowners with negative equity. Negative equity greatly increases the risk of foreclosure and default since a home sale will no longer fully cover the debt.

Home equity is illiquid. As wealth on paper and not cash in hand, it cannot be readily spent or used for purchases in its current form. An owner must typically sell the property or utilize it as collateral through home equity release products to convert equity into liquid funds.

As of March 2025, homeowners in the United States have over $35 trillion in home equity according to the Federal Reserve Bank of St. Louis.

Since the mid-1900s, home equity has been the primary strategy for the American middle class to build household wealth. In most Americans' portfolios, their home is their largest asset. According to the 2016 Survey of Consumer Finances, home equity contained in households' primary residence accounted for approximately a quarter of their overall assets.