What is home equity?
Equity is how much of your home you own. You can be in positive or negative equity. Find out why home equity is important and how it can affect the cost and type of mortgage open to you.
The headlines
- Equity is the difference between what your home is worth and how much you still owe on your mortgage.
- The more equity you have in your home, the lower your loan-to-value (LTV) ratio could be.
- You could build equity in a house faster by paying a larger deposit, overpaying your mortgage or increasing your property’s value.
Equity is how much of an asset’s value you own. With a house, mortgage repayments build equity. As your mortgage balance goes down and your home’s value changes, your equity can grow over time.
You can work out your equity by looking at its current value, minus the remaining mortgage balance.
When you have a mortgage, there are 2 main types of equity you could have.
- Positive equity. This is where the value of your home is higher than the debt you owe.
- Negative equity. This is where your house is worth less than what you owe on your mortgage.
When moving house, remortgaging or applying for a new deal, lenders will look at how much equity you have in your home. This helps them work out your loan-to-value ratio or LTV. This is the amount of money you want to borrow, compared to the value of your property.
How much equity is in your house?
Subtract how much you still owe on your mortgage from your property’s current value to work out how much equity you have in your home. Use these calculators to help you.
Loan to value (LTV)
Use a mortgage calculator to work out your LTV ratio.
This is the amount you have borrowed compared to the value of your property.
Budget calculator
Working out your budget will help you see where you could make savings.
Increasing your mortgage repayments may help increase your equity.
You can use your home equity when remortgaging to:
- get a better mortgage deal. The lower your LTV, the better rate you might be able to get
- borrow more on your mortgage. This could go towards home improvement plans, for example.
Extra borrowing is subject to approval and will increase your outstanding mortgage.
Remortgage
It’s important to get the right mortgage, whatever step of the ladder you're on.
See if you could save money by moving your mortgage to us.
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