Which term describes the difference between the market value of a home and the amount owed on the mortgage?

The term that describes the difference between the market value of a home and the amount owed on the mortgage is home equity. Home equity represents the homeowner's ownership interest in the property. It is calculated by taking the current market value of the home and subtracting any outstanding mortgage balance. This amount can increase as the homeowner pays down the mortgage or as the property's value appreciates. Understanding home equity is crucial for homeowners, as it can be leveraged for loans or used in selling the property.

The loan-to-value ratio, on the other hand, is a financial term that examines the ratio of the mortgage amount compared to the home's appraised value, not the difference between them. The principal balance refers to the remaining amount owed on the mortgage loan, which does not directly relate to the overall value of the home. The debt-to-income ratio is a measure used to assess borrowing capacity based on monthly debt obligations compared to income, rather than home value or equity.