What is Equity?Whether you are a homeowner, landlord or tenant we specialise in helping you to fully understand your equity together with enabling you to utilise it - right now or in the future. Probably the most common query in the equity arena is in relation to what the equity values or loan to values (LTV`s) are for a residential property, namely a house flat or bungalow which you own or wish to own.
You can get these figures in just a few minutes for free by calling our team on 0800 0159 295 or by following the three steps below:
Calculating Your Equity Value Or Loan To Value (LTV)
The first step to getting to your current equity amount is to know how much your home is worth (or the tenanted property`s value if you rent it out). You can get this from looking in the local papers at properties local to you of similar size and seeing how much they are being put up for sale. As most sale prices get knocked back slightly, you may want to shave around five percent of the asking price for accuracy.
Note this down as figure `A`
- Now the second step is about any debt secured on the home / property. This can be from a number of different sources - the most common being the mortgage that you may have taken out to buy the property in the first place. In terms of the equity impact you just need the approximate current balance outstanding. If you take a quick look at your most recent mortgage statement it will give you a current balance at that time, using this figure will be pretty close. Alternatively if you access to your credit report this may show your current mortgage balance too, but we would not advise on starting a paid credit search account to get this. Bear in mind if you have a legal advice charge, equitable charge or court charging order on the property these debts need to be added to the mortgage balance. However any personal loans, C.C.J.`s (not secured), credit cards, overdrafts etc. do not affect your available equity.
Note the total secured debts down as figure `B`.
- Finally step three has a few alternatives.
If you want to know your equity in terms of a `cash amount` then simply deduct £B from £A, (A - B) this will leave you what we term an equity value.
However many people talk about equity in relation to `loan to value` or LTV. in this case you need to divide B by A and then multiply by 100. This will calculate your percentage loan to value, the formula being:
( B/A ) X 100 = LTV.
What Equity Do I Need To Be Able To Borrow On It?Some lenders may go up to 95% loan to value of the property value less any secured debts (i.e. your figure `B` from above) for a loan secured on your equity. To see how this would work in practice let`s look at an example:
If your home is worth £200,000 (A) and your mortgage is approximately £120,000 - with no other debts secured on it (so B is £120,000) and we were able to arrange a loan at 95% of your equity the calculation would be:
(0.95 X A) £ B = Maximum Equity (in pounds)
Putting the figures in gives us (0.95 X 200,000) £ 120,000 = £70,000.
Clearly the loan to values vary regularly as do the loan terms and amounts available, so the simple & fastest way to find out your facts and figures, without any obligation to proceed, via My Sort of Loan is to fill in our online equity loan enquiry or give the team a ring for free on 0800 0159 295.
What Can Equity Loans / Secured Loans Be Used For?
- Renovate or repair some area of your home.
- A dormer style or standard loft conversion for living space.
- Consolidating credit into a lower monthly payment.
- Landscaping of a garden or installation of a Pond / Pool.
- Overhauling your current / having a new driveway.
- Purchase of caravan, motor home or static caravan.
- New kitchen, master bathroom or en-suite.
- Carpeting and decorating home makeover.
- Purchase of a new car / second family car.
- Cosmetic surgery or specialist treatments
- Cleaning up your credit history by paying of any bad credit.
- Settling a tax bill or paying school / university fees.
- Taking the family (or just you) on the holiday of a lifetime.
- Using as a deposit to enter the buy to let arena.