Mortgage Guides

Mortgage Equity

What is mortgage equity?

Mortgage equity (sometimes called home equity) is the value of your home minus any remaining capital you owe on your mortgage. Put simply, equity is the amount of your home you own.

How can I calculate mortgage equity?

To calculate how much equity is in your home you can use our mortgage equity calculator.

Here's an example;

  • Your home is valued at £200,000.
  • You paid a £30,000 mortgage deposit and have since repaid £50,000 of the capital you borrowed.
  • Your outstanding mortgage balance is £120,000.
  • The £80,000 paid off the £200,000 value of the property gives you 40% equity.
  • Once you have paid off your mortgage, you will have 100% equity.

What is negative equity?

Negative equity is a scenario where the remaining capital you owe on your mortgage is more than your property is worth. It is often caused by your property reducing in value, compared to the value of the property when you bought it.

An example could be:

  • You have an outstanding mortgage balance of £250,000 on your home.
  • Your home was valued at £275,000 when you bought it but is now worth £240,000 after a fall in house prices.
  • You are in negative equity of £10,000 (-4.2% equity).

Homebuyers with smaller mortgage deposits are more at risk of negative equity. For example, a 5% deposit mortgage means you only have 5% equity in your property when you complete the purchase. Therefore, a 5% fall in house prices would be enough to cause negative equity.

What is the Help to Buy: Equity Loan scheme?

The Help to Buy: Equity Loan scheme is a government incentive designed to help first time buyers purchasing property in England.

The scheme allows first time buyers to borrow an equity loan to cover from 5% and up to 20% of the property purchase price of a newly built home (up to 40% if the property is in London).

The equity loan percentage you borrow is used to calculate your interest and equity loan repayments.

For more detailed information, visit the Gov.uk website

If you apply for a NatWest mortgage as part of buying a home using the Help to Buy: Equity Loan scheme, property and buyer eligibility criteria will apply.

What does releasing equity mean?

Releasing equity means taking some of the equity you have built up in a property and turning it back into money. Your percentage of equity reduces but you have access to liquid funds in return. There are two main types of equity release products available that can help you release equity tied up in a property. There are costs and interest usually associated with these types of products.

NatWest does not currently offer 'equity release mortgages', 'lifetime mortgages' or 'home reversion' products. This information is for guidance only.

Lifetime mortgages

A lifetime mortgage (or equity release mortgage) is a long-term loan secured against your home. It's normally repaid when you move into long-term care or upon death.

Home reversion

This is where you sell part of or all your property to a home reversion provider. When you move into long-term care or upon death, the property is sold, with proceeds divided accordingly to the proportions of ownership.

Can I remortgage to release equity?

Yes, it may be possible to release equity from a property when you remortgage. You can find out more information on our remortgage webpage.