Finance glossary
Equity
Also known as: Home equity
In simple terms
Equity is the share of your home that you actually own — the property’s value minus whatever is left on the mortgage. If your home is worth £250,000 and you owe £150,000, your equity is £100,000.
On this page
What does equity mean?
Home equity is the value of your property that belongs to you rather than the lender. You work it out by taking the current market value and subtracting the outstanding mortgage balance and any other loans secured on the home.
When you first buy, your equity is roughly your deposit. Over time it usually grows as you repay the mortgage and, if prices rise, as the property gains value.
How equity works
Two things build equity: paying down the mortgage balance, and any increase in the property’s value. Both reduce your loan to value, which can give you access to better mortgage deals when you remortgage.
You can sometimes release equity — for example by borrowing more against the home, or through a later-life equity-release product — but this increases your debt and reduces the share you own, so it needs careful thought and usually advice.
How could this affect me?
More equity means a lower LTV, which typically means cheaper mortgage rates and more choice. It is also what you walk away with (after costs) when you sell, and a buffer that protects you if prices fall.
If prices fall far enough, equity can turn negative — you would owe more than the home is worth. Building equity steadily is one of the main protections against that.
Example
A home currently worth £250,000 with £150,000 left on the mortgage:
| Property value | £250,000 |
|---|---|
| Outstanding mortgage | £150,000 |
| Equity (value you own) | £100,000 |
| Equity as % of value | 40% |
Repaying the mortgage or a rise in value increases your equity; a fall in value reduces it. Figures are illustrative.
Things to watch out for
- Equity is based on the current market value, which can fall as well as rise.
- Releasing equity increases your debt and reduces what you own — and later-life equity release can eat into an inheritance.
- Selling costs (agent fees, legal fees, any early repayment charge) come out of your equity.
- A valuation is an estimate — the figure you can actually realise depends on what a buyer pays.
General information, not personal advice
Consumer Credit is an independent information service. We do not provide regulated financial advice or sell financial products. For advice on your own situation, speak to an appropriately authorised firm or a free service such as MoneyHelper. About Consumer Credit.
Sources
We checked this page against these official and authoritative sources.
- MoneyHelper, What is equity and how does it work? (opens in a new tab). Accessed 22 Aug 2026.
- FCA, Equity release and later life lending (opens in a new tab). Accessed 22 Aug 2026.