What does 'Equity' mean when buying a property?

Find out what Equity means when you are buying a property. 'What does Equity mean?' plus over 150 other property related terms and jargon in plain English


How much more or less your property is worth compared to a loan secured on it. So if your property is worth £200,000 and the mortgage on it is £120,000 then you have £80,000 of equity in that property.

Where a property is worth less than the mortgage or a loan secured on it, this is known as negative equity.

To learn all property related jargon pick up a copy of my ebook How to Really Buy a Property.

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How to Really Buy a Property

"... equity, when the price of someone's home becomes less than the value of the loan they took out to buy it, is ever popular. As we have already seen, at a local level, property prices rise and fall all the time. This means there are always people in negative equity. Those who take out 100%+ mortgages are immediately in negative equity but there is little talk of it in the press when the overall market is..."
"... the overall market is rising. In 2003 millions of home-owners were thrown into negative equity when military action in Iraq began but the press was more interested in the 'War on Terror' than property so the months when it happened passed with almost no comment. In 2008 there was not much..."
"... than property so the months when it happened passed with almost no comment. In 2008 there was not much else to report except the global credit crunch and then the media wanted to talk to people in negative equity. What the press reports is often happening all the time, just because they..."
"... think very carefully about what you read in the papers, see on the television or hear on the radio. Remember: There are always people in negative equity in good times or bad There are always people who have bought problems on themselves There are always people who will misuse mortgages..."
"... real question is how many people and is it actually a real problem. If for example there were 1,000 people in negative equity last year and there are 10,000 people now that might suggest an issue. But does it? Many of these people may be totally unaware of their situation as they have stable jobs and no need to sell. Negative equity only becomes a real issue when people need to sell and for this several factors must come in to..."

"... while, on average, property prices might increase or decrease - what happens on a regional basis can be quite the opposite of the national picture. Individual areas can experience their own booms and busts which leave some reaping extraordinary short term profits and others languishing in negative equity for years. These stories are rarely reported because, to the media, they have too small an audience to be..."
"... the interest was short lived and the properties soon lost over ten percent of their values. Buyers at the peak were left in negative equity until 2004 when the area truly started to come of age. In a heated Spring market the same properties reached peak prices of £270,000 before once again falling back in the Summer and then recovering in the Autumn...."
"... happened between 2001 and 2004 demonstrated a mini boom and bust on a local level. It happens continuously across the country and is noticed only by those it affects. For the many who owned properties in Clapham over a longer time period, they may never have even known they were in negative equity as by 2009 the average price had risen to..."

"... has all been to the delight of house builders who have increased prices substantially to the point where off-plan can actually be more expensive than comparable properties that already exist in the area . It can often take several years, however, for the market to catch up to these prices and it is now very easy to sit on negative equity over this..."
"... to a point where you may actually end up having to cover some of the mortgage payments or other costs from your own pocket. True Story - Four Years of Negative equity The Angel Southside development in North London became available to buy nearly two years before the completion date. Although..."
"... It took another two years until the values in the local market rose enough to meet the prices some buyers paid. In total many had suffered four years of negative equity. If you are buying off plan be sure to check property prices in the area and no matter how glossy the brochure and..."

"... are usually guaranteed for ten years. A newly built property's value will change in the same manner as the rest of the market. When prices are rising you are gathering equity (profit) which will eventually become the deposit on your dream property. Do not however assume that the new..."

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