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What is equity

What is equity?



Equity is the financial interest or cash value of your home, minus the current loan balance(s). Also called the difference between the market value of a property and the claims held against it. Equity is simply the amount of ownership value a homeowner has in the property. 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 the principal balance of the mortgage and/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 the property.

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