Equity
The difference between a property's market value and the outstanding mortgage balance.
Definition
Equity represents your ownership stake in a property — the difference between what it's worth and what you owe. Equity builds through three mechanisms: your initial down payment, principal paydown on each mortgage payment, and property appreciation. For example, a property worth $500,000 with a $350,000 mortgage has $150,000 in equity. Investors can access equity through cash-out refinances or home equity lines of credit to fund additional purchases. Equity is a key measure of wealth building in real estate and an important factor in portfolio-level financial planning.
How This Relates to DSCR Loans
Your equity position determines your LTV, which is a major pricing factor in DSCR loans. More equity means better rates and more refinance options.
Related Terms
LTV (Loan-to-Value)
The ratio of a loan amount to the appraised value of the property.
Appreciation
The increase in a property's value over time due to market conditions, improvements, or both.
Cash-Out Refinance
Replacing an existing mortgage with a larger one and taking the difference in cash.
Amortization
The process of paying off a loan through scheduled payments that cover both principal and interest over time.
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