eli5 What is equity?
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It’s how much of a loan or mortgage has been paid off. Or to put it another way, it’s how much cash you’d get if you sold your house.
If you buy a house with a mortgage. You don’t really “own” the house until the loan is paid off. if you sell it, you have to use some of the proceeds to pay off the mortgage, and you get to keep the rest.
Lets say the mortgage was $200,000. If you’ve paid off half the loan, you’ll have 100,000 in equity. If you sold it for 200,000, you’d get 100,000 cash (minus fees).
If the value of the house goes up, that counts as equity too. for the example above, lets say you bought it with a 200,000 mortgage, paid off half the mortgage, and now the value has gone up. you sell it for 350,000. you’d get 250,000 cash.
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