How to maximise equity in your home

Equity is something that every homeowner should be aware of. Simply put, the equity you have in your home is the market value minus your mortgage. So, if your home was worth £500,000 and your mortgage was £300,000, your equity would be £200,000.

There are several ways to maximise your equity in your home. Here are some suggestions for you to consider.

Understand your current equity position

Before you can make any changes, you need to take time to assess your current equity standing. You can use online tools such as home equity calculators to give you a snapshot of your current situation.

Try to make these checks part of your financial health checks, which should be done regularly. Checking in on your equity will allow you to track any progress through changes you make, as well as identify any further opportunities for growth.

Reduce your mortgage balance

The principal owed on your mortgage is the main factor in decreasing your equity. If you are able to, making overpayments is a great way to reduce the overall amount owed as well as any applicable interest – just make sure you don’t fall foul of any early repayment penalties.

Another option could be to use a reputable remortgage broker to renegotiate the terms of your mortgage. They may be able to find a new deal which aligns with your financial goals.

Invest in home improvements

Everyone wants their property to look its best, and investing in home improvements can achieve this as well as increase its market value. Seeing an increase in market value means your equity will see a boost too.

If you can, focus on renovations which offer high returns. The most popular choices are kitchen and bathroom overhauls. You may also choose to focus on the exterior of your home by rendering the outside of your property or giving your garden a new landscaped look.

Monitor market conditions

Although it can change quickly, it is important to stay on top of the housing market conditions. Rising property values can naturally increase your equity without you having to do anything.

It is thought that UK house prices are projected to rise by 2.5% in 2025, so it could be the right time for you to sell or release some equity from your home. Make sure you understand the trends so that you can make informed decisions.

Consider equity release options

If you are over 55 and a homeowner, you do have one option that younger households do not: equity release. Schemes such as lifetime mortgages are available under certain circumstances, and these allow you to borrow against your home’s equity without monthly repayments.

It is worth noting that equity release schemes do have an impact on your estate and potential inheritance options, so make sure you speak to a financial advisor before making any decisions.