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how much equity do I have in the home that I bought from HUD? Its appraised at $80,000. We've paid $1,000?

appraised at $80,000 Loan amount $40,000 which was full asking price since it was a HUD foreclosure. we've made 3 mortgage payments totalling $1,000 So do we have $40,000 in equity or $1,000? I'm asking because we're thinking about bankruptcy and only $7000 in homestead equity is exempt in Michigan for a married couple filing jointly

Public Comments

1. If the house is worth 80 and you only have an oustanding loan of about 40, then you have 40K in equity.
2. I'm guessing you got a "Good Neighbor Next Door" house from HUD since you said it appraised for $80k and your loan is for $40k. If you had already lived in it for three years, then you're equity would be the difference between what it's worth today (how much you can sell it for) and your loan balance of about $39k. The other $40k (that HUD does not charge you) is "forgiven" one third at a time after you've lived there 12 months, 24 months and then 36 months. Since you've only made three payments so far, none of the "other" $40k has been forgiven, and you only have about fifty dollars in equity right now - if you sold the house right now, you'd have to pay back both loans, which total about $79,950.
3. good luck declaring bankruptcy these days. it's very hard to do. laws changed last year.
4. 40,000 in equity formula = Market Price - Loan Balance = EQUITY - this is what makes you rich..... buy lowwer than normal market price and build equity..
5. If the house is worth $80,000 and you took out a mortgage for $40,000, on paper, you have about $40,000 in equity. Equity is when you take the value of the house and subtract the amount that is owed on it. The remaining amount is your equity. However there is a catch. First of all, you should know that for the first 5 years, your mortgage payment is nearly ALL going toward interest. If you look at your mortgage statement from the bank, it should break it down for you. If it's not there, look at your papers from the closing. There is something that is called a Truth in Lending statement that breaks down how much of your payment each month goes toward principal and how much goes toward interest. I'm guessing you may have paid less than $200 down on the balance of the mortgage over the last three months. So your equity has not really increased. Now, the other catch is this; Even though the house appraised at 80K, because the purchase price was 40K (also your mortgage amount) and because you have owned it for less than a year, if a bank was going to calculate your equity, it would use the purchase price as the value, not the apraisal. You have to have owned the home for at least a year for any bank to consider the appraised value for the purposes of equity. So in reality, you have probably about $200 in equity. Now, for the purposes of bankruptcy, I'm not sure which calculation they would look at. I would guess it would be the second one since you cannot reasonably be expected to access that equity through a lender right now. But Im not sure of that. Your bankruptcy attorney would know better. Since it's a HUD home, there may be other issues as well. You should consult an attorney about that.