Just+to+Clarify+(S10)

Principal**: Original amount of a debt
 * __//Abbreviated Notes//__--Just some basics
 * Interest**: Fee paid to lender (usually a bank) for a loan
 * Down Payment**: 1st payment for a large purchase. (Note: The loan starts AFTER the down payment)
 * Equity**: Value of what is owned.
 * Mortgage**: Home loan


 * Some examples/clarifications
 * A loan starts AFTER the down payment is made. Example: For a $200,000 home, if someone makes a down payment of $25,000, they will have a loan for $175,000.
 * In the example above, the original amount of the principal was $200,000. After the down payment, the person will have $175,000 left to pay of the principal.
 * In the example above, the amount of equity the investor has in the house is $25,000 (if the value of the house has not increased or decreased).
 * Once the investor starts paying back the lender (e.g. bank), he/she will be paying monthly payments to the lender. Those payments (let's say $1000/month) will be include payments toward the principal as well as interest payments. Toward the beginning of the loan, much of the $1000/month goes toward paying the interest while toward the end most of the $1000/month goes toward paying the principal. If someone chooses to pay more than the $1000/month, that money goes to paying the principal.
 * Q1: If a person has paid a down payment of $25,000 as well as three mortgage payments of $1000 with $300 going to the principal and $700 going to interest, how much equity does the person have in the house (assuming the value of the house has not increased/decreased)? (Answer below)
 * A person's home equity is dependent on the value of the house, not necessarily what has been paid. Q2: If a person completely paid off a home he/she bought for $200,000, but now the house is worth $250,000, how much equity does that person have in the home? (Answer below)

A1: $25,900 A2: $250,000