Property
Property Equity
Equity is the portion of your property's value that you own outright — the current market value minus any outstanding mortgages or secured loans.
Equity is what makes you a viable secured loan borrower. A house worth £350,000 with a £200,000 mortgage has £150,000 of equity. That equity is what the lender uses as security for the new loan.
Your borrowing limit is determined by how much of your equity the lender will lend against. At 85% combined LTV — the typical maximum — that £350,000 property could support up to £97,500 of new secured borrowing on top of the existing £200,000 mortgage.
Equity grows over time through three mechanisms: monthly mortgage payments reducing the outstanding balance, property value increasing with the market, and any home improvements that raise the property's worth. All three matter when you're sizing how much you can borrow.
Formula
Equity = property value − total outstanding charges
Worked example
£420,000 property, £180,000 mortgage = £240,000 equity. At 85% combined LTV, max new loan is (420,000 × 0.85) − 180,000 = £177,000.