What is equity?
Equity is a term used to describe how much saleable value of your home property that you actually own. It is the market value less the amount of the debt you still owe on the property. When you can borrow against the equity in your home it is called a home equity loan. The interest paid on home equity loans can often be tax deductible.
Equity is a crucial aspect of home loans. Equity is simply the value of a homeowner’s unencumbered interest on real estate. Equity is computed by subtracting the total of the unpaid mortgage balance and any outstanding liens or other debts against the property from the property’s fair market value. A homeowner’s equity increases as he or she pays off his or her mortgage or as the property appreciates in value. When a mortgage and all other debts against the property are paid in full, the homeowner has 100 percent equity in his or her property.
