Jul 25 2011

What is home equity? What is equity in a home?

Category: Real Estate


Home EquityHome equity is essentially the difference between the amount your home is worth and the amount you owe on your home. It is a constantly moving figure that is typically tied to the current fair market value of your property. Home equity will increase when payments are made toward the principle balance of the home loan or through increases in the property value. Real estate investors will often look to acquire property based upon the potential for it to grow in value and thus increase the equity. This increase will ultimately provide a return on their investment when it is sold. In recent years, many home owners and real estate investors are caught in situations where they have negative home equity. In these circumstances the home owners will occupy the property, sell the property at a loss, or rent out the property and wait for the market to turn back in their favor. Since the recent credit crunch and collapse of the housing market, many home owners are trapped in homes that have negative equity and have no other choice but to live in the upside-down dwelling. Also see home equity loan.

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