What is Equity?
The equity in a piece of real estate is the difference between what you owe and what it is worth. You can think of your equity as the part of your home value that you “own”. As your home value increases and your loan balance decreases your equity increases. You can turn a portion of your equity into cash by borrowing against it, either by refinancing or taking out a second mortgage or home equity line of credit. Generally, the only way to liquidate all of your equity is to sell, but a portion of your equity will go to paying Realtors and transaction costs. When selling, remember that your equity (on paper) is more than the amount of cash that you net from the sale.
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