Calculating equity involves determining the value of an asset after subtracting any debts or liabilities associated with it.
Equity represents the portion of the property’s value that you truly own, free from any outstanding mortgage or loans.
Here’s how to calculate equity:
Equity = Property Value – Mortgage Balance
For example, if your property is valued at £300,000 and your remaining mortgage balance is £200,000, your equity would be:
£300,000 – £200,000 = £100,000
Equity can also change over time due to changes in property value, paying down the mortgage, or taking out additional loans against the property.
Equity represents your ownership stake in the property and can be leveraged for various financial purposes, such as obtaining a home equity loan or selling the property.