Finance
What is 'home equity' and how does it relate to Delaware homeowner wealth?
AThe amount owed on the home mortgage
BThe difference between the property's market value and the outstanding mortgage balance — the owner's financial interest in the property that grows through appreciation and mortgage paydown✓ Correct
CThe value of the home's landscaping and exterior improvements
DThe homeowner's share of the neighborhood's average property value
Explanation
Home equity is the owner's net financial interest in their property: Market Value − Mortgage Balance = Equity. Equity grows as: (1) the property appreciates in value, and (2) the mortgage balance decreases through regular payments.
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Key Terms to Know
Amortization
The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Math Concepts
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