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

(1) The transformation of a racially integrated neighborhood-bousing pattern into segregated housing. (2) Deterioration, destruction, or decay. ...

Adobe construction is one of the oldest types of construction that has been used in the Americas, ancient Egypt, and the Middle East to build long-lasting structures that can be seen even ...

To undertake or take on a responsibility or duty. ...

When we talk about agency as a real estate concept, we understand the relationship between the real estate agent and the client. However, the term dual agency defines a type of agency that ...

Timeshare homes is the popular name given to the concept of fractional ownership in real estate, and, in fact, is a better term to explain its meaning.Why?Well, fractional ownership means ...

Relationship between individuals or entities out of which exists a mutual interest. An example is a privity of contract among the contracting parties concerning the actions each are to take. ...

Request of a local government's planning body to alter the zoning requirements based on a justifiable reason. ...

Secondary is something that is less important than or compared to something else. Secondary can also be a result of something or someone that is primary by definition. A secondary location ...

A joist to which a ceiling is attached. A ceiling joist usually consists of several small 2 x 4 boards nailed or mortised to the sides or bottom of overhead joists to which the ceiling is ...

Popular Real Estate Questions