Final answer:
The Correct option is D.Equity is the difference between the market value of a home and the amount owed on the mortgage. It can serve as a significant financial asset for homeowners and can increase.
Step-by-step explanation:
The difference between the market value of your home and the amount you owe the lender who holds the mortgage is known as equity.
For example, if the market value of your house is $200,000 and you owe $180,000 to the bank, your equity is $20,000 ($200,000 - $180,000 = $20,000).
In another scenario, if Freda's house is valued at $250,000 and she owes nothing to the bank, her equity is the entire $250,000.
Similarly, if Frank's house has a market value of $160,000 and he owes $60,000 to the bank (having paid off $20,000 of his original $80,000 loan), his equity would be $100,000 ($160,000 - $60,000 = $100,000).
Equity can increase over time as you pay off your mortgage and/or as the market value of your house appreciates.
For many homeowners, particularly middle-class Americans, home equity is their single greatest financial asset.