Equity and Remortgaging

Equity and Remortgaging

What is equity?

The equity that anyone holds in a property they hold is the amount of the properties value that they would actually own were the proper to be sold.  As an example, lets say you have just purchased a property for £100,000 and put down as deposit £25,000 and took out a mortgage of £75,000, then you would have equity in that property of 25 percent.

Now lets consider a point in the future, say after a year and assume you have made some improvements to the property, have paid towards the mortgage and have seen a 5 percent rise in house prices. Your equity then could be:

  • New property value – This will have increased by  inflation at 5 percent = £50000, plus your home  improvement value increase adding £5000, giving a new property value of £110,0000      .
  • Reduction in mortgage outstanding – If your mortgage is on a repayment basis you will have paid something towards the mortgage loan which may make bring the value of the outstanding loan down to say £74,000. This does not apply to mortgages on an interest only basis.

Using these assumptions, you would now have a property worth £110,000 but only owe £74,000 of that to the mortgage lender meaning that you would now hold equity in the property of £110,000 – £74,000 giving you equity in the property of £36,000 or 32.72 percent.

Read Our Remortgaging Guide


Expat Remortgages

When you remortgage your property, you are switching your mortgage arrangement to another deal with the same or another lender. Remortgages can be used for various purposes by releasing equity in property, however most people simply switch mortgage because it will work out cheaper for them then their current mortgage repayment.

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