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
With a mortgage (or any other loan) your monthly payment goes to a combination of interest (profit for the lender) and principal (pays down the balance of the loan).
If I had a $200,000 mortgage and have paid $100,000 to principal since then, I have $100,000 in equity in my house.
If I sell my house, I still need to pay off my mortgage as the bank owns it. So (ignoring things like closing costs) if I sell that same home for $200,000, I need to spend $100,000 to pay off the remaining principal leaving me with $100,000 left over.
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