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
Having equity in the home means it is expected to sell for more than you owe on the mortgage. It doesn’t “make” money. It means that if you sell the home, you will receive the difference between the sale price and the amount of money it will take to pay off the mortgage. It is important to know that if a real estate agent is used by either the buyer or the seller, the seller is expected to pay the real estate agent commission out of the proceeds as well.
Edit: If the house is expected to sell for more than you paid for it, then in theory you made money. But that is due to appreciation of the value of the home and not the only way to build equity. The other way is to pay down the principle on the mortgage.
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