The equity in a property is best defined as the net surplus value that remains after any secured loans against the property are deducted from the property’s market value.
For example, where a home is worth £225,000 and the owner has an outstanding mortgage on the property of say £125,000, the homeowner can be said to have ‘equity’ in the property equating to £100,000.
If property values fall or the mortgage balance increases (perhaps during a period of non-payment) then the equity in a property will decrease. Eventually, the equity will reduce to nothing and possibly even become negative. For example, the homeowner may buy a house for £150,000 with a mortgage of £125,000. Values may fall by say 20% meaning the home is now worth just £120,000. With a mortgage outstanding of £125,000 there is a negative equity in the home of £5,000.
Nowadays banks and mortgage lenders are under an obligation to ‘stress test’ their lending criteria. Hopefully this will enable house buyers to raise mortgage funds based on sensible Loan to Value and income multiple parameters.
For more information contact us or speak to a mortgage adviser on 01628 507477.
Recent posts
There was a 32% increase last year in 100% loan-to-value (LTV) mortgages which are mortgages that require zero deposit. According to a recent report by chartered accountants and business advisers, Lubbock Fine, the reason behind this is buyers simply struggling to save enough for a deposit.
Average savings by age in the UK
Yesterday
Many people are quite private when it comes to what is in their bank account. In this short blog, we look into what Brits have saved by age group.
Research from buy-to-let lender, Landbay, shows that UK landlords are looking at raising rents ahead of the Renters' Rights Bill which is due to come into force this year.
Data shows landlords could miss out on green mortgages due to expired energy performance certificates.
Buying a house is a big deal, and where you are planning to buy will make a difference financially. In this short blog, we look at the most affordable and most expensive areas and how much you need to be earning to buy in there.
Pros and Cons of Equity Release
20 May 2025
Equity release is a type of mortgage that allows homeowners 55 and over to access money from their property's equity without having to leave their home. This is done by securing a loan against the house which is usually repaid by selling the property when the borrower passes away or has to move into long-term care.
Your House Viewing Checklist
19 May 2025
It’s important to ask questions about the property you are interested in before taking that step to make an offer. A little probing can make all the difference between buying your dream house or something that requires a lot of work.
Half of over 60s predicted to benefit from accessing housing wealth through Equity Release
16 May 2025
There are millions of homeowners over the age of 60 who are likely to release money from their homes to pay for their lifestyle during retirement giving those who are 'asset rich but cash poor' a way to live out their retirement the way they wish.
More information
Trusted by
