Equity is the portion of your home that you own outright. It’s the difference between the current value of your property and the amount you still owe on your mortgage.
For example, if your home is worth £200,000 and your outstanding mortgage is £120,000, your equity is £80,000. This is your financial stake in the property, and it usually grows over time as you pay off your mortgage or as the value of your home increases.
Equity is not fixed. It can go up or down depending on the housing market and how much of your mortgage you have paid off.
How does equity build over time?
Equity tends to grow in two main ways. First, each time you make a mortgage payment, you reduce the amount you owe, which increases the share of the property you own. Over time, this helps build equity steadily, especially if you’re on a repayment mortgage.
Second, if the value of your home rises, your equity increases as well, even if your mortgage balance stays the same. This can happen gradually with market growth or more quickly if you improve your home and boost its value.
On the other hand, if property prices fall or you take out additional borrowing against your home, your equity may decrease.
Why is equity important?
Equity plays a key role in many financial decisions linked to your home. The more equity you have, the more options you’re likely to have when it comes to remortgaging, borrowing further, or releasing money later in life.
Lenders often use your equity to assess how much risk is involved. If you have a higher equity stake, you may be offered better rates or more flexible terms. This can be useful if you’re looking to switch deals, fund improvements, or consolidate borrowing.
Equity is also important when selling your home in Doncaster. After the mortgage is repaid, the remaining value is yours to use, whether that’s for your next property or something else entirely.
What can you do with equity in your home?
As your equity grows, it can be used in different ways depending on your needs. Some homeowners remortgage to access part of their equity, often to fund home improvements, repay other debts, or help family members.
Others use equity release products, such as a lifetime mortgage in Doncaster, to unlock funds later in life without needing to move. This can provide a lump sum or smaller amounts over time, while still allowing you to stay in your home.
Equity can also give you more flexibility when moving. If you’re downsizing or relocating, the equity from your current home can go towards your next property, reducing or even removing the need for a new mortgage.
How much equity do I need to remortgage?
When remortgaging in Doncaster, the amount of equity you hold in your home can affect which deals are available to you.
While there’s no fixed requirement across all lenders, most will expect you to have at least 10 to 15 percent equity. This is often referred to as your loan-to-value (LTV), which compares your mortgage balance to the current value of your property.
If you have more equity, for example, 20 percent or more, you’re likely to access a wider range of products, often with lower interest rates. A stronger equity position can also help if you’re looking to borrow more or switch to a new lender.
The exact amount needed will depend on the type of deal you’re applying for, your income, and your credit history.
Can equity be negative?
Equity can become negative if the amount you owe on your mortgage is more than your property’s current market value. This situation is known as negative equity. It often happens when house prices fall shortly after buying a home with a small deposit or if your mortgage is interest-only and the balance has not reduced over time.
Negative equity can make it harder to move home or remortgage, as most lenders are unlikely to approve new borrowing that increases the risk further. In some cases, you may need to wait until property values recover or until you’ve paid off more of your mortgage to regain a positive equity position.
While not common in a rising market, it’s something to be aware of if property values dip or your mortgage balance has remained high.
Speak to an expert
If you want to make the most of the equity in your home, we’re here to help. As a mortgage broker in Doncaster, we work with a wide range of lenders and can guide you through your options, whether you’re looking to remortgage, raise funds, or explore borrowing later in life.
Our mortgage advisors in Doncaster will take the time to understand your goals and help you find a solution that fits your circumstances.
Date Last Edited: June 13, 2025
