Home Equity Loan
Utalizing Homeowner's Equity

Home Equity Loan: Equity is the value of a homeowner's unencumbered interest on real estate or the difference for a home mortgage loan,  simply 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 his or her mortgage 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% equity in his or her property.

On a newly purchased $80,000 home with a $16,000 cash down payment, the buyer's equity is $16,000. As the value of the property rises or falls and as the equity loan is paid down, equity changes. For example, if the value of the home rises to $90,000 and the loan is paid down to $62,000, the owner's equity will be $28,000. If the owner pays the loan off so that there is no debt against the home, his equity will be equal to the market value of the property.

Home Equity Loan to Home Loan