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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