What is equity, and how can you use the money you saved up in your home to borrow cash for other purposes, such as paying off debts.
Well, equity is the share you own of the value of your home. For example, of your home is worth £200,000 and your mortgage is £150,000, your equity is £50,000. Equity is what you own in your home, and the value of the house that you don’t have to pay any mortgage on. This will include the amount of deposit you originally put into the home when you purchased it.
There are two ways you can increase your equity, such as appreciation of the value of your home, which means your house or flat goes up in price but the mortgage stays the same. Or, there’s the value of your home that stays the same, but you reduce your mortgage debt with a repayment mortgage.
In other words, you pay off the underlying mortgage debt in order to reduce the amount of money you’re borrowing from the bank or building society. However, you can work out how much equity you have by subtracting your remaining mortgage debt from the actual value of your home.
The Value of your home was £350,000 when you first purchased it. You put in a deposit of £35,000, and have made mortgage repayments worth £20,000, your equity is currently £55,000. This leaves a remainder of £295,000 left to pay, but if the house price has increased, say by £10,000, then the equity would then stand at £65,000.
Don’t forget that house values do fluctuate, but if you were having your home valued by your mortgage company for borrowing purposes, the value might not be quite as high as estimates from property websites.
Look, it’s not uncommon for homeowners to borrow against their equity by remortgaging to get a cash lump sum, often to pay for home improvements that can add value. This is called Remortgaging to release equity, or Remortgage equity release.
If you want to Remortgage to release equity, If you want to Remortgage to release equity you will need to contact your current mortgage company or Remortgage with a new lender in order to release the cash.
With mortgage rates relatively low, remortgaging may seem like the cheapest way to borrow large sums of money. But borrowing more means paying more interest overall, so is it a better idea than a short-term loan?