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Home equity
The current value of your home, minus the total amount of mortgage debt on the home. This amount represents the share of your home that you owe outright. If you owe no mortgage debt, the value of your home is entirely your equity. Often used as a source of borrowing for homeowners, home equity is not a static amount. It increases as you pay off your mortgage loan, and if your home value rises. It decreases if you borrow more against the value of your home, or your home's value declines. For example, if your home is appraised with a market value of $100,000, and you have mortgage debt of $60,000, your home equity is $40,000.
Home equity loan
A home equity loan is a mortgage loan that is secured by the residual equity in your home. (To calculate equity, subtract mortgage debt from your home value.) Home equity loans allow a homeowner to make repairs or other home improvements, refinance other debt, or use for general purposes. Unlike a home equity line of credit, a home equity loan is an amortizing loan. (Some states prohibit or restrict equity-based loans and lines of credit. )
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