00:01
Let's talk about the simple example of buying a house to understand what equity is.
00:05
So first of all, equity is essentially a measure of assets minus liabilities.
00:13
So it's essentially equal to net worth or net assets.
00:18
Right.
00:18
So if we take a look at, say, a person buying a home, so they want to buy this house over here that's worth $100 ,000.
00:24
But they can only afford to make a down payment of $10 ,000.
00:27
Right.
00:27
So this is them with their green cash payment of $10 ,000.
00:30
Thousand dollars and then they're also going to take out a loan from this bank down here of the other ninety thousand dollars that they need to purchase the home right so in this example their assets so they're gaining a hundred thousand dollars worth of assets in their house but they're also taking on ninety thousand dollars worth of liabilities right so their net worth of this house their equity in this house is ten thousand dollars so this is what this house is worth to them right when they first buy it.
01:00
This is how much of the house that they actually own...