Home equity, and how to release it
Equity is the part of your home you own outright. This guide explains how it builds, the ways to turn it into cash, and the trade-offs to weigh before borrowing against your house.
What home equity is
Equity is your property's value minus the mortgage secured on it. A £360,000 home with a £190,000 mortgage holds £170,000 of equity — about 47% of the value, an LTV of 53%. Equity grows two ways: as you pay down the mortgage (each repayment buys a little more), and as the property's value rises.
Equity = property value − outstanding mortgageWays to release equity
There are several routes, each with different costs and risks:
- Remortgage for more: Switch to a new, larger mortgage and take the difference as cash. Usually the cheapest route if you can pass affordability.
- Further advance: Borrow extra from your existing lender, often at a different rate to your main loan.
- Second-charge mortgage: A separate loan secured behind your main mortgage — useful if you don't want to disturb a good rate, but typically dearer.
- Lifetime mortgage (equity release): For older homeowners (usually 55+): borrow against the home with no monthly payments, repaid from the eventual sale. Interest rolls up, so the debt grows.
What people release equity for
Common uses include home improvements (which may add value), consolidating more expensive debt, helping a child with their own deposit, or funding retirement. The key test is whether the benefit justifies turning unsecured flexibility into secured, long-term debt against your home.
Consolidating debt is a trade-off
Before you borrow against your home
Releasing equity raises your LTV, which can push you into a more expensive rate band, and it increases your monthly payment and total interest. With a lifetime mortgage, rolled-up interest can erode the inheritance you leave. Always check the impact on affordability, on any benefits you receive, and take regulated advice — equity release in particular requires it.
Common mistakes
- Treating equity as free money. It's borrowing secured on your home, repayable with interest, not spare cash.
- Overstating your value. A surveyor's valuation may be lower than you hope, reducing how much you can release.
- Ignoring the rate-band effect. Raising your LTV can move you to a pricier band, increasing the cost on the whole loan.
- Skipping advice on lifetime mortgages. Rolled-up interest and early-repayment charges make these complex — regulated advice is required for good reason.