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Equity is the difference between what a property is worth and how much money is still owed on it. In other words, it's the part of the property's value that the owner actually owns without any debt. As you pay off your mortgage or the property's value increases, your equity grows, making it an important part of your overall wealth.
For example, let's say John bought a house for $300,000 with a $60,000 down payment. He still owes $240,000 on his mortgage. The current market value of his house has increased to $320,000. To calculate his equity, you subtract the mortgage balance from the current value: $320,000 - $240,000 = $80,000. So, John has $80,000 in equity.
"Wit & Whimsy with the Dumb Ox: Unlocking Knowledge with Rhyme:"
In the land of homes and loans, where people reside,
Equity's a word, that's not hard to provide.
It's the value that's yours, in the place where you dwell,
Minus the debt, that you still have to quell.
John bought a house, a sweet place to live,
A down payment he gave, and a mortgage to give.
His home's value grew, and his loan shrank away,
Equity blossomed, in a wonderful way.
So when you think of your home, and the value it carries,
Remember your equity, and the wealth that it marries.
A measure of ownership, that continues to grow,
Equity, dear friend, is the treasure you sow.