Trevor and Lynda bought a home in 20013 for $185,000 with a 20% down payment. Their mortgage payments were only applied to interest on the mortgage balance. If they have to sell their home in 2016 for $148,000, what would be the value of their equity?

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Since their mortgage payments only covered the interest, the principal balance remained the same. They made a 20% down payment on $185,000, which is $37,000. However, selling the house for $148,000, which is less than the original price minus the down payment ($185,000 - $37,000 = $148,000), means they would just break even on the principal amount owed, leaving them with no equity.

Trevor and Lynda Bought a Home in 20013 for $185,000