Which component is used to calculate a borrower's equity in a property?

The component used to calculate a borrower's equity in a property is the current market value minus the mortgage balance. Equity represents the portion of the property that the borrower truly owns, which can be determined by assessing how much the property is worth compared to how much is still owed on the mortgage.

When the current market value of a property increases, the equity also increases, reflecting the borrower's gain in ownership. Conversely, if the market value decreases or the mortgage balance remains unchanged, the equity may diminish. This relationship between the market value and the mortgage balance is crucial for understanding the financial standing of a homeowner.

The other options, such as the property's original purchase price, might provide historical context but do not reflect current ownership value. The interest rate of the mortgage and the location of the property are significant in different contexts, such as determining monthly payments or property desirability, but they don't factor into the calculation of equity directly.