The math behind equity

[Nathanael Giovanni Opoulos]

I can't seem to figure out how to search the biggerpockets forums. If someone else had already covered this question elsewhere I was unable to locate it.

It had only been a few days since I began learning about real estate. I have a cursory understanding of equity. My comprehension amounts to this example.

120k home purchased. 100k loan + 20k down. Equity starts at 20k and increases as 100k loan is paid off.

I.e. Equity = appraisal amount - remaining mortgage balance

I'm trying to determine if this is correct, and If so, is the calculation based on remaining principal or does interest factor into the equation somehow. Also, when you make a sale say 5 years in, is the remaining interest on the mortgage dissolved?

Thanks,

Nathanael Giovanni Opoulos