How exactly does equity work? |
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Member since May 2012
11226 posts

How exactly does equity work?

Is it simply the difference between the purchase price of your home and what you currently owe?

Auburn Fan
New Orleans, LA
Member since Apr 2011
11784 posts

re: How exactly does equity work?
LINKIt's the current value of the home less the amount you owe on the mortgage.

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Washington DC metro
Member since Mar 2008
31897 posts

re: How exactly does equity work?
It refers to the old accounting definition of assets = liabilities + equity. It applies to basically any economic entity, not just housing. Equity is what is left over after liabilities are taken care of.

It's what the owner has in the game, basically. In cases where there is no owner (nonprofits, government) it is called "net position" instead.

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Member since Jun 2008
2438 posts

re: How exactly does equity work?
if you're wanting to borrow against your equity, lenders will give you around 80%.

You take 80% times your home value subtract how much you owe. the result is how much they are willing to lend.

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