Buying a home is definitely one of the most significant financial decisions a person can make. For many homeowners in the UK, equity will play a significant role in their property journey.
Equity, simply put, is the difference between the current market value of your property and the outstanding mortgage balance. It plays a pivotal role in determining your eligibility for a new mortgage, the interest rates you'll receive, and the overall affordability of your next home purchase.
Here’s how the equity in your home could impact your next home purchase.
Building Equity
As a homeowner, there are two main ways to build equity: paying down your mortgage and potential property appreciation. Making regular mortgage payments reduces the outstanding balance, increasing your equity in the property. Additionally, if your property's value appreciates due to market conditions or property improvements, your equity will also increase.
Buying another home
Equity is vital when it comes to buying a new home. When purchasing a new property, you can put your equity towards a deposit. The higher your deposit, the more advantages you could unlock, including lower mortgage rates, reduced monthly payments, and a higher chance of securing a mortgage.
Upgrading or downsizing
When you’re planning to move to a new property, your equity may influence whether you can afford a more expensive home, or if you’ll need to make a lateral move or even downsize. If you’ve accumulated substantial equity, upgrading to a larger, more valuable property, might be within reach.
On the other hand, downsizing could free up funds for other financial goals if you've built considerable equity in your current home.
Check out the below calculator for an idea of what you may be able to find on the mortgage market.
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Use the results as an idea of what's available. Contact us for mortgage advice as we'll be able to find you the best mortgage for your circumstances. We have access to over 12000 mortgage deals from over 90 lenders.
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Making the most of your equity
Understanding how your equity impacts your next home purchase is vital for making well-informed decisions. Building equity in your current property not only provides financial security but also opens doors to new mortgage opportunities.
Get in touch with an adviser today to find out how to make the most of the equity in your home, whether it be moving or improving.
Important information
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.
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