It decreases the amount of home equity, lessening the amount that can be borrowed in a home equity loan. Down payment - The difference between the purchase price and the amount financed in a mortgage. It is usually between 10 and 20 percent. Equity - The value of a homeowner's unencumbered interest in real estate. Equity is the difference between the home s fair market value and the unpaid principal balance of the mortgage and any liens.
Equity increases as the mortgage is paid down or as the property appreciates in value.
Fair market value - The likely selling price of a home. In a mortgage or a home equity loan, fair market value is often determined by appraisal. Federal Truth in Lending Act - This law requires lenders to inform a borrower about the terms of a loan, including a home equity loan, at the time a borrower is given an application. Lenders must disclose the APR and payment terms and must inform borrowers what will be charged to open or use the account. Lenders also must explain if a loan includes a variable rate.