equity

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Equity is a term used in finance to define the value of an ownership interest in property. It is the interest of the junior classes of investors after all liability is paid. The appropriate term for when the liability exceeds the assets is negative equity. Stockholder's equity is used in accounting to refer to the remaining interest in assets, divided between individual stockholders.

Home equity represents the difference between the fair market value and the unpaid mortgage value for a home. When the property value appreciates or as the debtor starts to make payments against the mortgage value, the property's equity increases.

Private equity denominates a type of asset comprised of equity securities in various companies that are not publicly traded on a stock exchange. Private equity firms, informal investors and venture capital firms will usually make private equity investments.

Equity release refers to the means by which an individual can raise money against the value of their home, without any regular payments. In the United Kingdom, there currently are three types of equity release plans, namely lifetime mortgage, home reversion plans and draw-down lifetime mortgages.

Lifetime mortgages enable home owner to release a tax free sum of money against their property, to be spent freely. The home owner is able to live in their home for the rest of their life, or until they are moved into a care facility, after which the loan is returned in full.

Home reversion plans allow home owner to sell a part of their home in return for a sum of money, which again, can be spent freely. This enables the home owner to pass a percentage of the home as inheritance to their family.

A drawdown lifetime mortgage is similar to a lifetime mortgage, with the only difference that the money must be drawn in stages. This type of equity release plan is currently one of the most popular in the UK.


Equity is also a legal term used to denote a set of principles in common law jurisdictions. It is usually said that equity can "mitigate the rigor of common law", by allowing courts to apply justice in accordance to natural law, as it is understood in contemporary jurisprudence.

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