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How Can I Calculate How Much Home Equity I Have?

With many homeowners making the most of the equity they have in their homes to move to a better property, having good levels of equity in your home gives you more options. Even if you don’t have quite as much as you would like, it does not take a long time to build up. The first step to take if you want to find out what these options are is to calculate how much equity you have in your home.

What is equity?
Equity is the amount of your home that you own. It’s not difficult to calculate, simply subtract the amount of debt you owe in mortgages or loans from the market value of your property.

What you need to calculate the equity in your home accurately?

Get an up-to-date valuation of your home
The more accurate your valuation, the better. So, use a good local agent, their instant online valuation tool will value your home in just a minute.

Find out how much you owe on your mortgage
Get in touch with your mortgage provider to find out exactly how much you owe. If you have borrowed for home improvements, get an up-to-date balance on these loans also.

Subtract your debts from your home’s value
For example, if your home is worth £375,000 and your outstanding mortgage balance is £180,000, you have equity of £195,000 in your home.

How to calculate this equity as a percentage?
To calculate equity as a percentage of your home’s value, simply divide equity by your home’s value and multiply by 100.

Using the figures above as an example:

(£195,000 equity / £375,000 home value) x100

In this case, the percentage equity is 52%.

How to calculate your LTV ?
To calculate your LTV (loan to value) as a percentage, simply divide the amount you owe by your home’s value and multiply by 100.

Using the figures above as an example:

( £180,000 mortgage debt / £ £375,000 home value) x100

In this case, the percentage LTV, is 48%.

Having a good level of equity means cheaper mortgages
Whether you are remortgaging or moving on, the lower your LTV percentage figure, the lower your mortgage rate will be. You only have to look at mortgage providers’ lending rates to see that interest rates are lower for mortgages with an LTV of 60% in contrast to those with an LTV of 90%. Simply put the bigger your deposit, the cheaper your mortgage interest rate.

Equity gives you options
It’s comforting to know you have got good equity in your home. But taking out some of that equity can offer a lot of positives. If you are making home improvements or investing in another property, then you are putting it to good use and could gain significantly from it. That said, you might want to move on and having a large deposit will open the doors to some exciting properties.

Increasing your equity and the improving market
There are many ways to increase equity levels, from overpaying your mortgage to large and small home improvements. The current UK property market is improving. Inflation is at its lowest level for two years, at 3.4%.* The number of sales agreed, recorded by Rightmove, in March, was 13% higher than the same time last year.** This leaves you with a choice. You can keep gaining equity more rapidly as property values increase, thanks to increased demand, or move while the market offers good deals on better homes.

Book a valuation to see how much equity you have gained over the years

Published On: 29 May 2024

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