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What is Meant by the Term “Equity”?

Equity is the value of an asset (e.g house, car) minus any debts attached to that asset.

For a property, the equity would be the current market value of the property minus the balance of any loans attached to that property.

As an example, say we have a property as follows:

  • The current value of a property is $1,000,000
  • and

  • The loan balance against that property is $600,000

The equity in this property would be $400,000. That is $1,000,000 – $600,000 = $400,000

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