Getting Equity

Article Excerpt from Yahoo! Finance: (http://finance.yahoo.com/expert/article/mortgage/100252)

A 20 percent down payment can also be described as a borrower having equity in the property of 20 percent. In the future, equity in the property is measured by the difference between the current value of the property and the current loan balance, both of which are likely to differ from their values at the time of purchase.

One reason the down payment is so important is that it is the single most vital factor affecting loss to the lender. The down payment is a buffer against lender loss in the event of a foreclosure. For example, if foreclosure costs are 20 percent of value and property value does not change, a 20 percent down payment fully protects a foreclosing lender against loss, but a 10 percent down payment provides only partial protection.

Perhaps even more important, borrowers who get into payment difficulties but have equity in their properties usually will sell to avoid foreclosure. By selling, they realize the equity themselves, whereas if they allow the property to go to foreclosure the equity will be partially or wholly depleted by foreclosure costs. Their selling avoids the foreclosure.

Find the best prices on Garden City Beach real estate at Hall Realty and Investment Company.