# Equity

Canonical URL: https://olomon.com/financial-glossary/equity
Markdown twin: https://olomon.com/financial-glossary/equity/llms.txt
Category: Assets & Investments (https://olomon.com/financial-glossary/categories/assets-investments)
Also known as: Owner's equity, Net equity
Last updated: 2026-04-18

## Definition

Equity is the residual ownership value in an asset after all related liabilities are subtracted. In a home, equity equals market value minus mortgage balance. In a business, equity equals total assets minus total liabilities. Across the full household balance sheet, the sum of all equity positions is your net worth.

## Key takeaways

- Equity = Asset value − Debts secured by or attributable to that asset.
- Home equity, business equity, and “owner's equity” on a balance sheet are all the same idea applied at different scales.
- Equity grows from price appreciation, debt paydown, and reinvested earnings.
- Tappable equity (HELOC, cash-out refi) is only a portion of total equity and depends on lender limits.

## How Olomon thinks about this

_The following section is Olomon's first-party perspective, informed by our work building a financial system of record. It is intentionally separated from the neutral definitional content above._

Olomon calculates equity automatically across every asset — homes, rentals, vehicles, businesses, and investment accounts — by linking each asset to its corresponding liabilities and refreshing market values. That gives you a true equity ladder rather than a gross-asset number that hides what you actually own.

## In-depth definition

Equity is one of the most overloaded words in finance. It can mean (a) ownership in a public or private company (“I own equity in Apple”), (b) the residual value in an asset after debt (“home equity”), or (c) the bottom of the balance-sheet equation (“owner's equity”). All three uses share the same underlying idea: what's left after subtracting what is owed from what is owned.

### How equity grows

- Price appreciation — the asset itself becomes more valuable
- Debt paydown — each principal payment reduces [liabilities](https://olomon.com/financial-glossary/liabilities) and grows equity
- Retained earnings — in a business, undistributed profit grows owners' equity
- Capital contributions — new money put into the asset

## Formula

```
Equity = Asset Value − Liabilities
```

On any single asset, equity is what remains after subtracting all debt secured by or directly attributable to that asset. Across the entire household, the same equation produces net worth.

## Worked examples

### Home equity

A family owns a home with a $620,000 market value and a $410,000 mortgage. Their home equity is $210,000.

### Private company equity

A founder owns 40% of a company valued at $5,000,000 with $1,000,000 of debt. The total business equity is $4,000,000, and the founder's stake is worth approximately $1,600,000 before any preference or liquidation waterfall.

## Frequently asked questions

### What's the difference between equity and net worth?

Equity is the ownership value in a single asset (or class of assets). Net worth is the sum of all your equity across every asset, minus any unsecured liabilities. In effect, net worth is total household equity.

### Is home equity a good source of borrowing?

It can be, because it's collateralized borrowing at relatively low rates. But you're using your home as security, and tapping equity reduces the cushion you'd need in a downturn or sale. Treat home equity as a strategic, not casual, source of capital.

## Sources

1. [What is home equity? — CFPB](https://www.consumerfinance.gov/ask-cfpb/what-is-home-equity-en-1933/) — Consumer Financial Protection Bureau. Cited for: Definition of home equity for consumers.
2. [Understanding Equity Securities](https://www.sec.gov/files/ib_understandingequities.pdf) — U.S. Securities and Exchange Commission. Cited for: Public-company equity ownership.

## Related terms

- [Net worth](https://olomon.com/financial-glossary/net-worth)
- [Liabilities](https://olomon.com/financial-glossary/liabilities)
- [Appreciating asset](https://olomon.com/financial-glossary/appreciating-asset)
- [Balance sheet](https://olomon.com/financial-glossary/balance-sheet)

## Cite this page

Olomon Editorial Team. (2026). Equity. Olomon Financial Glossary. https://olomon.com/financial-glossary/equity

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Source: Olomon Financial Glossary (https://olomon.com/financial-glossary).
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