Equity is the owner’s financial interest in real property. It is the difference between the property’s current value (or sales price) and the total debts (liens) secured by the property.

• Equity = Market Value (or Sales Price) − Total Liens (loan balance + other liens)

• Purchase price and down payment % (to find the loan amount)
• Loan balance at the time you’re asked about
  • If no payments have been made, the loan balance = original loan amount
  • If payments have been made, you’d need either:
    • an amortization schedule, or
    • info that lets you compute the remaining principal
• Sales price (or current market value)

• Down payment = Purchase Price × Down Payment %
• Loan amount = Purchase Price − Down payment
• Equity at sale (simple) = Sales Price − Loan Balance

Mr. Johnson purchased a property for $125,000 with 12% cash down. He sold for $139,750 before making any payments.

• Down payment = $125,000 × 0.12 = $15,000
• Loan amount = $125,000 − $15,000 = $110,000
• Since no payments were made: loan balance = $110,000
• Equity at sale = $139,750 − $110,000 = $29,750

(Alternate check: equity = down payment + profit = $15,000 + ($139,750 − $125,000) = $15,000 + $14,750 = $29,750)

• Interest rate and payment amount often appear in the question, but if it says no payments were made, you usually don’t need amortization—the balance hasn’t changed.