How does equity in a home make money upon resale?

Question

I am completely lost on the concept of buying a home and the selling it before the mortgage is paid. How does this make money/contribute to a new mortgage?

In: Economics

Answer 1

Where is the new mortgage coming in?

I buy a house for $100,000 with a $100,000 mortgage. Five years later, I have paid $50,000 of my mortgage. But, the market value of my house also went up to $150,000.

At this stage, you have $100,000 of equity in the home because it’s worth $150,000 but you owe $50,000 on the mortgage still. Meaning, if you sold the house you would be left with $100,000 in your pocket.