Equity from what the property is worth minus what it secures

Short answer: Equity equals current property value minus total debt secured by the property. Add every stated mortgage and lien balance that belongs in the question before subtracting. Equity percentage equals equity divided by value, multiplied by 100. Negative equity means secured debt exceeds value. Principal paydown increases equity when value stays constant, while additional secured borrowing decreases it. Appreciation increases equity when debt stays constant, while value decline decreases it. When value and debt both change, calculate beginning equity and ending equity first, then reconcile the difference into value change, principal reduction, and added borrowing. Equity is not the same as down payment, cash invested, seller net proceeds, taxable gain, or the amount a lender will allow the owner to borrow. A home can have positive equity but produce little sale cash after payoffs and closing costs. For a lending-limit question, apply the supplied maximum LTV or CLTV and subtract existing balances.

This guide uses simplified exam snapshots. Actual value may come from an appraisal or another permitted valuation, and different valuations can differ because their dates, purposes, data, or methods differ. Actual secured debt, payoff amounts, accrued interest, advances, available line-of-credit capacity, lending limits, priority, and closing costs come from current records and program rules. A credit limit is not the same as an outstanding balance, and a principal balance is not always the final payoff through closing. An owner cannot assume that estimated equity is cash or immediately borrowable. Borrowing against home equity also puts the property at risk if repayment obligations are not met. Sources were checked through August 1, 2026.

1. Circle the requested result: equity dollars, equity percentage, equity change, negative equity, or additional borrowing under a stated limit.
2. Identify the correct value and valuation date, ignoring an old purchase price when current value is supplied and rejecting any unsupported future appreciation estimate.
3. List every secured balance included in the problem at the same effective date and keep ordinary unsecured debts outside the subtotal.
4. Subtract total secured debt from value and preserve a negative result.
5. For equity percentage, divide the equity dollars by the same property value and multiply by 100.
6. For a change question, calculate beginning equity and ending equity separately before comparing them.
7. For additional borrowing, apply the stated maximum debt-to-value cap and subtract existing secured balances.
8. Reverse-check that equity plus secured debt equals value, then label the answer in dollars or percent and state whether a negative result is equity or a separate shortfall measure.

These questions are original study items aligned to the published outline. They are not copied, recalled, or predicted PSI questions.

Do not count recognition as mastery. Close the notes and explain the rule, apply it to a new fact pattern, and identify why each distractor fails.

• Study equity with LTV and PITI
• Convert the same value and debt into LTV
• Keep equity separate from seller net
• Practice randomized equity calculations

• PSI Illinois Candidate Information Booklet dated June 24, 2026
• Consumer Financial Protection Bureau, current home-equity definition and loan explanation
• Consumer Financial Protection Bureau, current home-equity loan and HELOC comparison
• Consumer Financial Protection Bureau, current mortgage-valuation explanation
• Consumer Financial Protection Bureau, current mortgage balance and servicing guidance
• Freddie Mac My Home, home-equity formula and homeowner explanation

The current official outline controls the tested scope. Statutes, regulations, and official agency materials control when a general study rule and a jurisdiction-specific rule differ.