What primarily determines the amount of home equity a homeowner has?

Home equity represents the portion of a homeowner's property that they truly own and is calculated by determining the difference between the current market value of the home and the outstanding balance on any mortgages or loans secured against that property. When a homeowner buys a house, they typically make a down payment and borrow the remainder through a mortgage. Over time, as the homeowner pays down the mortgage and if the property value appreciates, the equity in the home increases.

For instance, if a homeowner's property is valued at $300,000 and they have $200,000 remaining on their mortgage, their home equity would be $100,000. This calculation is critical for financial decisions such as refinancing, obtaining a home equity loan, or selling the property.

The other options focus on factors that, while they might influence a homeowner's financial situation indirectly, do not directly determine the amount of home equity. Property taxes are an obligation based on assessed value but do not affect equity itself. The market prices of similar homes in the neighborhood can impact a home's market value, but they are not a direct measure of the homeowner’s equity. Lastly, a credit score plays a role in obtaining mortgages and loans but does not factor into the fundamental calculation of home equity. Collectively,