To free themselves from debt and save their credit rating, many home owners are willing to forfeit the little equity they have remaining. If there is a desire to move or sell, is the next best option. If the Home Owner wants to capture some of the equity, they can request the buyer to provide a cash payment for the equity. Legal documents would be necessary to accomplish this. Sellers who have a lot of equity use traditional selling versus finding a buyer to assume their mortgage.

  • Home equity = The difference between the market value and the outstanding balance of all liens on the property.
  • True equity = The amount you can capture in cash. This is normally received in a check when you close a loan.

It is important to recognize that there is a difference between the two terms.

Example- Sellers who have little equity in their property should realize that even though it is called Home Equity, you will not be able to get 100% of it. Only a portion of it is the true cash equity. Home equity is appealing to buyers. True equity is appealing to sellers.