A home was bought 4 years ago. The purchase price was $92,000 and the buyer made a down payment of $11,000. The current loan balance is $79,000. The house was recently appraised for $116,000. What is the equity?

Rationale

The equity in the home is $37,000.

Equity represents the difference between the appraised value of the home and the current loan balance. In this case, the home's appraised value of $116,000 minus the loan balance of $79,000 yields an equity of $37,000.

A ($13,000) YOUR ANSWER

This option incorrectly calculates equity. The equity is determined by subtracting the current loan balance from the appraised value. A figure of $13,000 does not reflect the correct difference between these two amounts.

B ($24,000) CORRECT

This choice is incorrect as it miscalculates equity. To find equity, one must take the appraised value of $116,000 and subtract the loan balance of $79,000, resulting in $37,000. Therefore, $24,000 does not represent the correct equity amount.

C ($35,000) YOUR ANSWER

This option also misrepresents the calculation of equity. The equity is derived from the appraised value minus the loan balance, which does not yield $35,000. This option fails to account for the correct values involved in the calculation.

D ($37,000) YOUR ANSWER

This choice is not correct. While it reflects the correct value derived from the calculation, it does not correspond with the options given in the question and thus cannot be selected as a valid choice.

Conclusion

Equity is defined as the appraised value of a property minus the outstanding loan balance. In this scenario, the significant difference between the appraised value of $116,000 and the loan balance of $79,000 results in an equity of $37,000. Proper understanding of equity calculations is crucial for homeowners to assess their financial standing in relation to their property.

A home was bought 4 years ago. The purchase price was $92,000 and the buyer made a down payment of $11,000. The current loan balance is $79,000. The house was recently appraised for $116,000. What is the equity?

The equity in the home is $37,000.

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