Equity is the value YOU own in a property, such as a house. It’s the difference between what’s OWED and what the property is WORTH in the current market.
The example this video shows – you have a house worth $300,000 today, and you owe the bank $200,000. Your equity would be $100,000.
If the house is valued at $500,000 in five years, and you still owe $150,000 your equity will be $350,000.
Equity grows if the property value goes up, or if the amount owed goes down. The bank’s loan doesn’t go up if the home’s value goes up.
Equity in a home can be used as collateral for loans, but a house is not a piggy bank. Home equity can become a key financial asset over time; treat it wisely.