Definition of "Trading on equity"

Also called financial leverage. The use of borrower funds to magnify return. Trading profitably on the equity, also called favorable financial leverage, means that the borrowed funds generate a higher rate of return than the interest rate paid for the use of the money. The excess accrues to the benefit of the owner because it magnifies, or increases, his or her earnings.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Real Estate Terms

English-style home. It is usually 2-stories high. The roof is of a hip type. The chimney is on the side of the home. ...

A testator/testatrix who donates real property. ...

If you’re looking for the real estate agent definition, you’re in the right place. So, in the following paragraphs, we will try to examine the complex job of a real estate ...

Also called earnest money. Money deposited with an individual for security for the performance of some contract. This is intended to show his/her willingness to follow through with the ...

Document that must accompany a new issue of securities for a real estate company or partnership. It includes the same information in the registration statement, such as a list of directors ...

To depreciate is to lose value for something. Depreciation is the act of losing worth.Connecting with real estate, Property depreciation can be both an accounting method typically used to ...

A person has the option of canceling a contract previously agreed to. ...

A delay in making a principal payment on a mortgage that a bank allows a debtor for current financial difficulties. The extension of a loan at maturity at the 'going' market interest ...

Initial offer to buy or sell answered with a revised offer. For example, a buyer offers $500,000 for a home put on the market. The owner rejects the offer but submits a counteroffer for ...

Popular Real Estate Questions