Foote Title Group – Equity
Equity is the amount you are borrowing in relationship to the actual value of the property you’re purchasing. So when you purchase a property, let’s say your purchase a piece of property for $200,000 and you need to borrow $180,000 to purchase that property. That would give you $20,000 in equity. That equity number can change throughout your ownership depending on what the real estate market is doing, so it really may have nothing to do with you or what your ability is to pay down your loan. Conditions that affect equity are always changing. Many people think that when you buy a piece of property it will start increasing in value. That way hopefully when you sell it it may be worth more than what you paid for it, then you’ll have a considerable amount of equity to invest in your next property but that’s not always true. In the last eight years we’ve seen that the real estate market was very volatile and then it crashed. A lot of people who purchased homes lost not only the equity they had going in but the real estate values have also changed a lot. Therefore equity is based on many factors and some of which might be out of the owner’s control.