InvestingAll terms starting with E
Equity
The difference between what a property is worth and what is owed against it.
Equity grows three ways: the down payment you put in, principal paid down each month, and appreciation. It is unrealized until you sell or borrow against it.
Lenders measure the same relationship from the other direction as loan-to-value, and the available portion is limited by what a lender will lend against the property.
Put a number on it
This term feeds the calculators below.
Related terms
- LTV (Loan-to-Value Ratio)The loan amount as a percentage of the property’s value, the main measure of how much equity cushions the loan.
- HELOC (Home Equity Line of Credit)A revolving credit line secured by your home equity, drawn and repaid like a credit card during a draw period.
- Cash-out refinanceRefinancing for more than you owe and taking the difference in cash, converting equity into spendable funds.
- AppreciationAn increase in a property’s value over time, from market movement or from improvements made to it.
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