Question

building equity in a home is a good thing because
equity in a home increases the homeowner’s net worth.
mortgage payments decrease as equity increases.
property taxes decrease as equity increases.
credit scores increase as equity increases.

Explanation:

The question is about why building equity in a home is good. Equity in a home is the homeowner's net worth in the property (home value minus mortgage debt). As equity increases, the homeowner’s net worth (equity = home value - mortgage) increases because net worth related to the home is tied to equity. Let's analyze each option:

• "credit scores increase as equity increases": While good equity might correlate with good credit, it's not the direct reason equity in a home is good. The primary benefit of home equity is net worth, not credit scores.
• "property taxes decrease as equity increases": Property taxes are based on home value (or assessed value), not equity. If equity increases due to home value increase, property taxes would likely increase, not decrease. So this is incorrect.
• "mortgage payments decrease as equity increases": Mortgage payments (for a fixed - rate mortgage) are based on the loan amount, interest rate, and term. Equity increasing (e.g., by paying down the mortgage or home value increase) doesn't directly decrease mortgage payments. So this is incorrect.
• "equity in a home increases the homeowner’s net worth": Equity is part of the homeowner's net worth (net worth = assets - liabilities; home equity is an asset). So as home equity increases, the homeowner's net worth (related to the home) increases, which is a key reason building home equity is good.

Answer:

The option "equity in a home increases the homeowner’s net worth" (the bottom - most option in the provided image, the fourth box from the top)