Equity is the value of a homeowner's interest in real estate. Equity is computed by subtracting the total of the unpaid mortgage balance and any outstanding liens against the property from the property's fair market value. A homeowner's equity increases as he or she pays off his or her mortgage or as the property appreciates in value. When a mortgage and all other debts against the property are paid in full, the homeowner has 100% equity in his or her property.