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

Unit of ownership in a real estate investment trust. ...

People often use the term in their everyday discourse, yet many wonder what the meaning of common law genuinely implies. Common law refers to a system of jurisprudence based on court ...

An abstractor, or, most commonly known as an abstractor of title, is the individual that determines based on thorough research the condensed history needed for an abstract of title. They ...

Grouping of several columns arranged in intervals supporting an architectural overhang, usually a roof. ...

Mortgage-backed, pass-through securities that segregates mortgage pools into short, medium, and long-term. CMOs arose because GNMA or FHLMC mortgage-backed securities have uncertain time ...

Thinking about selling your own home without an agent? You can. For Sale By Owner or FSBO is how it’s called in the real estate world. It's when a homeowner decides to sell his/her ...

Body o law relating directly to condominiums and cooperative developments. Most property law provides vertical ownership of property in the sense that property owners own mineral rights as ...

Trading of two or more properties containing separate descriptions and separate financial statements. ...

(1) Mildly convex arch built into a load bearing beam, girder, or truss to counteract any load bearing stress placed on it. (2) Slight slope designed into a structure such as a drive4way or ...

Popular Real Estate Questions