What is home equity? Home equity is the value of ownership built up in a home or property over time. With the current market price of the property, less the remaining principal amount, the equity in the property is assumed.
The equity builds up over time as the property owner pays off, and then the mortgage principal is reduced at an exponential rate. When the property value in the neighborhood appreciates, the owner will benefit from the additional gain in equity in addition to gaining equity by paying the mortgage.
So how is equity compared to cash? While cash is paid at 1:1 ratio to equity, equity may be turned into cash once the property is sold at a discount. If the property is sold above the purchase price the percent of ratio will be a gratifying reward for the owner.
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