What Is Home Equity?

After several years of making mortgage payments, you will have accrued an amount of equity in your property based on how much of the loan’s principle you have already paid off. In other words, home equity is the difference between your property’s current market value and the remaining balance of your mortgage.

For instance, if your home is valued on the current market at £150,000 and the balance of your mortgage is £50,000, the amount of your equity in your home would be £100,000.

Back in the 1980’s, many homeowners had what was called “negative equity” when their properties were devalued after the housing market went through a recession. Because of the large mortgages that they had when the prices of their homes went down, people ended up owing more money than their properties were really worth.