Equity...the bit of property you own!

Equity: The value which an owner has in an asset over and above the debt against it. Eg the difference between the value of a property and the amount still owed on the mortgage.

Ahhh this is a good one. Equity is that bit of the property that you own. In the beginning it might feel like you own the front porch and not a lot more, but quickly this grows as the property market increases in value and your loan balance drops.

Quite literally, equity what’s it worth – less what you owe = your equity.

This is, however, different to accessible or useable equity.

Accessible equity is the portion which you might want to access for future investment or a holiday – lenders won’t generally lend more than 90% of the property value, so again, what is it worth, multiply this by 90% and take away what you currently owe and this is what you could potentially access.

Building your equity is useful, both in that it means you’re paying your home off (and that’s the end goal) but its also available to you if you have future plans. Perhaps you would like to renovate, or upgrade or invest. Equity allows you to do these things without having to have cash savings. Of course if you increase your loan you have increased repayments – totally ok if affordable and part of your overall plans.

Featured Posts