When I Sell My House, What Happens to the Equity?

As you pay off your mortgage, you build equity in your property. But what does this mean, and what happens to that equity when you sell your house?

In this article, the team at Property Solvers – the fast cash homebuying company – explain how equity works when selling your property.

We’ll explore what equity is, how to calculate it, what happens when you “release” equity, and even what happens if you fall into “negative” equity.

What is Equity in a Home?

Estate agents, mortgage brokers and other real estate specialists often talk about “equity”. But what does this mean? What is equity in property? And how does it affect the sale of your home?

Simply put, equity is the amount of your property’s market value that you own outright. It does not incorporate the money that is still due on your mortgage – just the amount you have already paid off in terms of your deposit and loan.

The more of your house’s overall value that is rightfully yours – i.e. the higher the percentage of its value that you have paid for – the more equity you will have in the property.

Certain home improvements and renovations will also count. If a change you have paid for adds value to your home, it represents an additional equity “stake” that you now own.

How to Calculate Equity in a Home

It’s easy to work out how much equity you have in your home in basic terms.

Simply find an accurate estimate of your property’s current market value, then subtract the figure that is left to pay on your mortgage. You should be left with the amount you have already paid – which equals your home equity.

If you are not sure of how to approach this, simply get in touch with your current mortgage provider for assistance.

What Happens to the Equity in my House When I Sell?

So – what happens to equity when you sell your house?

The way equity is utilised depends on the specifics of a sale. When you sell your property to a buyer, the payment they make is usually divided between:

• Any expenses you incur as part of the sales process; and
• Paying off outstanding mortgage amounts.

The remainder will go to you. The precise amount you receive will depend on how much equity you have in the home.

The higher your equity percentage (and the more you can save when selling), the more likely you are to turn a good profit.

Can I Sell My House if I Have Equity Release?

If you have released equity in your home, you should still be able to sell it – whether you plan to downsize or find a new home of equal value.

It’s possible to port an equity release from one property to another. You can do this as long as the new property is considered “suitable” by your equity release provider. You should consult a mortgage broker or financial adviser to help you do this.

Many people choose to release equity to gather funds for starting a business, to make home improvements, to pay for care or to cover any other expenses that require a large lump sum in one go.

Equity release can be particularly tempting as the amount is usually tax free. However, it’s important to think carefully before releasing the equity in your home. After all, it may affect the property you’ll be able to purchase in the future – and could diminish any profit you may make on your current home.

How to Sell a House with Negative Equity

It is possible to get into “negative equity” – particularly during a period of national financial crisis. Negative equity is where a property’s value sinks below the value of the mortgage you took out on it.

Perhaps the most obvious way to get out of negative equity is to sit tight and wait for the market to improve before you sell. Alternatively you could:

• Undertake renovations to raise the property’s value beyond that of the mortgage.
• Make mortgage repayments until the remaining loan is worth less than the property.
• Borrow money to pay the difference between the home and mortgage value.

We hope this article has helped you to gain a better understanding of equity and its role in your house sale.

Whatever the level of equity you currently have in your home, you can sell it fast with Property Solvers. This is even the case if you are in negative equity.

We’ll make you a no-obligation cash offer up front, equating to between 80 and 75% of your property’s market value. We’ll then close the sale in as few as seven days. You won’t have to pay any estate agent or solicitors’ fees. The entire process will be fast and fuss-free, and out team will offer you expert support throughout.

Find out more about how Property Solvers can sell your house fast by getting in touch with us today.