khanacademy asked:
Simple example of borrowing from equity to fuel consumption ... accounting finance credit crisis mortgage
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That’s because you don’t ACTUALLY have that 1.5 mil yet, you have it when you sell the house
Equity is the gap between the cost of your house when you bought it and the positive (more worth) value at a certain time, or when it gains value
Therefore if you sell the house, you’d make enough money to pay off the bank and make some cash; but until then your house is STILL the banks; that’s why you take out a loan, your house isn’t yours until you pay it off including the equity;
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Hey Joesteinbock….read again and stop being smart. He did start out by saying “i originally bought a house for one and a half mil. “
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These videos are absolutely brilliant. Well done for noticing the recession in early 2008! Many economists only became sure of that in 2009.
Yes and no. Assuming that the car is actually worth 100K, you’re right. But if you live in a reasonably densely populated city with a half-decent public transit system, chances are that the car isn’t worth the book value.
In much of Scandinavia, for example, commuting by car is actually more expensive than commuting by train *just in terms of running costs* – which argubly makes the car an asset with a *negative* value in purely economic terms.
In the Netherlands they also have the option to get the “overvalue” of the house from the bank. So people could use that amount of money, not for holidays but only for improving the house.
I have a house but i did not really understand the concept until this video, thanks for that.
Luckily i did not use that “overvalue” because this overvalue will go down as the prices decrease of houses. So this overvalue is a kind of buffer for decreasing house prices.
Just a question Sal> If I bought a car than we should write the car in assets, in this case 100K and cash will decrease by 100K, So equity should stay the same. Am I wrong?
Its never too early to learn about managing your money.
I just don’t really understand why you owe the bank 325k when its coming out of your house.
Should I Be Watching This I’m fifteen ? But I NEED To Learn This.
Hey strawman….read and pay attention….
He said he originally bought it for 1 million AND he said the 1.075 is an approximation.
You originally bought a house for a million and a half dolalrs, and a year later, the value of the house went up to 1.5 million???? Im confused.
Also 75% of 1.5 million is $1,125,000 not $1,075,000
You’re right. Although I wanted to show how home equity withdrawal made people feel rich and consume more. Education, for the most part, is an investment and, assuming the student is responsible, will generate a return.
I love these videos, very educational and true…but perhaps give some home owners a better wrap than people who will go on a 100K vacation…perhaps they spent it on education! The result is the same