August 13, 2010, Newsletter Issue #201: Definition of Equity

Tip of the Week

Equity is defined as the value of your home less any liens (mortgage, home equity loans, etc.). So if your home is worth $500,000 and you have a $300,000 mortgage, your equity is $200,000. Many people borrow against the equity in their homes by taking out a home equity loan or 'second mortgage.' Keep in mind that if the value of your home goes down, the amount of equity you have decreases, which can leave you 'upside down,' or owing more than your home is worth, if the real estate market in your area takes a sudden tumble.

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