What is 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 available.
Understanding equity
Having equity in your home can help provide a buffer in case house prices fall. If your house is worth less than what you owe on your mortgage, you could be in negative equity.
Why equity is important
Mortgage lenders look at what equity you have in your property to calculate the loan to value ratio (LTV). This is the amount of money you want to borrow, compared to the value of your property.
Can you build equity?
It is possible to build equity in your home. Here’s some ways to do it.
Overpaying your mortgage
By overpaying on your mortgage, you can build equity. Either through making higher monthly payments or paying off a lump sum.
Limits may apply and you may have to pay an early repayment charge. Check with your provider what limits and charges apply.
Pay a larger deposit
Putting down a larger deposit when you buy, can also help build equity early.
Making your monthly mortgage repayments, unless you’re on an interest-only mortgage, builds up the equity in your property as you reduce the amount you owe.
House price rises
Equity in your home can also increase as house prices rise.
As the value of your home rises, the gap between what you owe and how much it’s worth increases.
Working out your equity
Subtract how much you still owe on your mortgage from your property’s current value. Our calculators may 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.
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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