Business A to Z

Equity


The residual dollar value of a futures trading account, assuming its liquidation at the going market price. In real estate, it is the value of a homeowner's unencumbered interest in real estate.

Equity is computed by subtracting from the property's fair market value the total of the unpaid mortgage balance and any outstanding lien or other debts against the property. A homeowner's equity increases as he pays off his mortgage or as the property appreciates in value. When the mortgage and all other debts against the property are paid in full the homeowner has 100% equity in his property.


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