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Hello.
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Today we're going to look at a problem where we have three individuals who have borrowed or paid all of the amount that they have to buy homes.
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And we've been asked to find the equity that each person has in their home.
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So we have fred, who's bought a house of $200 ,000 by paying 10 % as down payment.
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And borrowing the rest from the bank.
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We have frida, who has paid $150 ,000 for her home, and that amount is all in cash.
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And then we have the homes resale value go up to $250 ,000.
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And then lastly, we have frank, who's bought his home for $100 ,000 by paying 20 % end up.
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Payment and borrowing the rest from the bank.
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However, later his home's resale value has increased to $160 ,000 and he has also repaid $20 ,000 that he had borrowed.
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So first, we'll take a look at what does equity in a home for a person mean.
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So owner's equity or just equity, we'll refer to that as he is the monetary value that person gets after deducting all of the amount that was borrowed to buy that home or to buy that asset, right? so monetary value after resale minus whatever amount was borrowed.
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Now, applying this to our example, first fred, well, he has a home for, $200 ,000, he paid 10 % of that amount and borrow the restaurant bank.
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We've not been given any information on the resale value or changes in the resale value.
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So we'll assume that his resale value remains the same.
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So fred's home has a value of, and mind you, this is monetary value.
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$200 ,000.
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He's bought.
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Around 90 % because he paid 10 % in down payment so the 10 % down payment becomes 10 % of $200 ,000 which is $20 ,000 and the rest was borrowed right so rest is borrowed now this equals $180 ,000 we've assumed that his resale value is the same as what he had bought the home for.
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So resale equals value equals $200 ,000.
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Now equity therefore will become the monetary value after resale which is $200 ,000 minus whatever was borrowed.
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So he had borrowed $180 ,000 from the bank.
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So effectively its owner's equity or equity in his home is $20 ,000.
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Now let's consider the second case of freedom.
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So freedah's home value, oh this there should be a yes here, fidda's home value is $100 ,000.
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Sorry, $150 ,000...