Exploring Assets, Liabilities, and Equity

The video explains the concept of equity, using a house purchase as an example. It defines equity as the difference between assets and liabilities. Initially, when a house is bought with a mortgage, equity is zero. Over time, as the house appreciates in value and the mortgage is paid down, equity increases. The video concludes by explaining that equity represents the value remaining after liabilities are paid off.

What is equity?

• The total value of your home

• The difference between assets and liabilities

• The amount of your mortgage

• The appreciation value of your home

If you buy a house for $300,000 with a mortgage of the same amount, what is your initial equity?

• $300,000

• $150,000

• $0

• $100,000

What is considered an asset in the context of home ownership?

• The mortgage

• The home itself

• The interest rate

• The property tax

Why is a loan considered a liability?

• Because it increases the value of your home

• Because it is something you have to pay back

• Because it appreciates over time

• Because it is an asset

If your home appreciates to $400,000 in five years, what is the appreciation value?

• $100,000

• $400,000

• $300,000

• $200,000

After five years, if you pay down your mortgage to $210,000, what is your new equity if your home is valued at $400,000?

• $100,000

• $190,000

• $210,000

• $400,000

What does it mean to liquidate your asset?

• To sell your home

• To buy a new home

• To refinance your mortgage

• To increase your mortgage

How much cash will you have if you sell your home for $400,000 and pay off a mortgage of $210,000?

• $400,000

• $210,000

• $190,000

• $100,000

What does equity tell you about your home?

• The value you have in your home after paying off liabilities

• The appreciation value of your home

• The amount of your mortgage

• The total value of your home

What is the basic concept of equity in home ownership?

• The appreciation value of your home

• The difference between the value of your home and your mortgage

• The amount of your mortgage

• The total value of your home