Home equity: Difference between revisions

'''Home equity''' is the [[market value]] of a homeowner's [[Encumbrance|unencumbered]] interest in their [[real property]]—that is, the difference of the home's [[fair market value]] and the outstanding balance of all [[lien]]s on the property. The property's [[Ownership equity|equity]] increases as the debtor makes payments against the [[mortgage loan|mortgage]] balance, and/or as the property value [[capital appreciation|appreciates]]. In [[economics]], ''home equity'' is sometimes called '''real property value'''.

 

 

Homeowners acquire equity in their home from two sources. They purchase equity with their [[down payment]], and the principal portion of any payments they make against their mortgage. They also benefit from a gain in equity when the value of the property increases. Investors typically look to purchase properties that will grow in value, causing the equity in the property to increase, thus providing a return on their investment when the property is sold.