Home equity refers to the difference between the fair market value of your home, minus the amount of liens or encumbered interests on your home. For most people a lien or encumbered interest means the balance remaining on your mortgage and/or secured debts- such as a secured line of credit.

If you are selling your home, and you have no liens or mortgages to pay out- your equity would be the amount you sold your home for. For example- if you owned your home free and clear and sold it for $400,000.00 you would have $400,000 in equity from your home. If there was a mortgage and other secured interest that were claimed on the title of your home that added up to $200,000- then you would have $200,000 in equity: $400,000-$200,000= $200,000.