What is the term for the portion of property value that exceeds the mortgage debt?

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Study for the Washington Real Estate Fundamentals Rockwell Exam. Utilize flashcards, multiple choice questions with hints and explanations. Prepare thoroughly for your real estate career!

Multiple Choice

What is the term for the portion of property value that exceeds the mortgage debt?

Explanation:
Equity is the portion of property value that exceeds the mortgage debt. It reflects the owner’s actual stake in the home. For example, if a house is worth $400,000 and the mortgage balance is $320,000, the equity is $80,000. Equity grows when you pay down the loan or when the property's value rises, and it shrinks if the property value falls or you take on more debt. The other terms refer to different concepts: interest is the cost of borrowing, taxes are property taxes assessed by the government, and appreciation is the increase in property value over time (which can increase equity but isn’t the definition of the portion that exceeds debt).

Equity is the portion of property value that exceeds the mortgage debt. It reflects the owner’s actual stake in the home. For example, if a house is worth $400,000 and the mortgage balance is $320,000, the equity is $80,000. Equity grows when you pay down the loan or when the property's value rises, and it shrinks if the property value falls or you take on more debt. The other terms refer to different concepts: interest is the cost of borrowing, taxes are property taxes assessed by the government, and appreciation is the increase in property value over time (which can increase equity but isn’t the definition of the portion that exceeds debt).

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