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Equity
The difference between a home's market value and the amount the owner owes on the mortgage Equity is the amount of money you'd have if you sold your home today and paid off your mortgage. As the market value of your home increases, so does your equity. Similarly, if your home's value decreases, your equity does too.
Example: How much equity do you have after three years? " & _
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Your down payment |
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$20,000 |
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Your home's appreciation in the first year
$110,000 x .03 |
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3,300 |
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Appreciation in the second year
$113,300 x .03 |
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3,399 |
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Appreciation in the third year
$116,699 x .03 |
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3,500 |
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Amount paid toward your mortgage principal |
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4,574 |
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Equity |
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$34,773 |
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You bought your home 3 years ago for $110,000 with a $20,000 down payment. Your property's value went up by 3% every year and you've paid off $4,574 of your principal. If you add the down payment, total appreciation and the amount paid off on your principal, your total equity after 3 years is $34,773.
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