Definition:

The interest or value that an owner has in a property that is over and above the mortgage or other liens against it. The equity interest is the true ownership interest in the property; that interest generally holds the right to control the various aspects of property ownership, although the mortgage or other lien interests may place limits on that control. Equity holders have a chance to earn relatively larger returns on investment than do debt holders; while the debt must be repaid first (and thus the equity holders bear more risk), any price appreciation of the property upon sale (after the debt is paid) goes to the equity holder.

definition of equity for small business loan

Example:

After purchasing their home for $500,000 and putting $50,000 in renovations into the property, the home value is now estimated at $700,000, giving the homeowner the estimated equity of $150,000.

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