What does equity mean?

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Equity refers to how much of a property you own outright, as opposed to how much money you still owe your mortgage lender. 

A good way of visualising this is to think about what would happen if you sold your property – the equity is the amount that would go straight into your pocket (while the rest of your property’s value would go back to your mortgage lender to pay off your loan).

Your equity will normally increase over time. This is because you’ll usually pay off more of your mortgage as time goes on, and your property will probably also increase in value.

Nuts About Money tip

By remortgaging to release equity, you can get much-needed cash to fund home improvement projects such as building an extension. Just remember that remortgaging involves taking out a bigger loan, which will increase the amount of interest you have to pay overall.

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