In property or contract law, what does the term 'equity' refer to?

Equity in the context of property or contract law primarily refers to the interest in a property that exceeds the amount owed on any mortgages or liens against it. Essentially, it reflects the true ownership stake a person has in a property after accounting for any debts secured by that property. For example, if a homeowner has a house worth $300,000 and owes $200,000 on their mortgage, their equity in the property would be $100,000, which is the difference between the market value and the mortgage debt.

This concept is fundamental in various legal considerations, such as in the case of selling a property, refinancing, or determining the distribution of assets in the event of a divorce or bankruptcy. It represents the portion of value that legally belongs to the owner and can thus be used to satisfy creditors or be leveraged for loans.

The other options, while related to property concepts, do not accurately capture the definition of equity as understood in property law. Personal property rights refer to ownership of movable items rather than real estate interests, market value is a broader term related to appraisal rather than direct ownership interest, and legal title specifically pertains to the documentation and rights associated with owning the property itself, excluding any financial consideration of equity.