Explaining Home EquityPosted by Judy Orr on
What is the definition of home equity?
The total amount of your outstanding mortgage(s) deducted from the current market value of your home appears to be a relatively straightforward computation. Here's an easy example:
$525,000 = is the current market value of your home
$225,000 = what is still owed on your mortgage
$300,000 = your equity in the home
The loan balance, which appears on the monthly mortgage statement, is one side of the equation that is factual. The second side is less obvious: your home's current market value. Until the home is listed on the market and you receive an offer, a market value is only a guess.
When you make a home purchase, your down payment creates the initial equity of your home. Every mortgage payment you make…
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