What happens to equity when you sell a house?
When you attempt to sell a property, you may come across some unfamiliar financial terms such as equity. It can be a confusing time, especially when you’re a novice when it comes to all the financial jargon. So to help you gain a better understanding, we have put together a beginner’s guide to equity. We will explore what equity is and what happens to it after the sale is complete.
Equity is the term given to the amount remaining after the sale, after paying all debts, fees and any other liabilities attached to them. This means you calculate it by taking the value you sold your house for, and deducting all the debts attached to it. The largest debt to consider would be the remaining mortgage on the property, this will need to be paid with the proceeds of the sale along with any estate agent and solicitors fees. An example is shown below:
- Property Selling Price: £200,00
- Remaining Mortgage: -£90,000
- Estate agent and solicitor fees: -£10,000
- All other expenses: -£2,500
Equity = £97,500
Equity builds up in your home mainly from the payments you make towards your mortgage. First, equity starts as the deposit you pay to secure the mortgage. It then builds when you make your monthly payments, as your remaining mortgage decreases, your equity in the property increases. When property market conditions are healthy, and the value of your home increases, this also increases equity. Once your home is sold and all the debts have been paid the remaining value; or equity, will be transferred to you, the seller.
When selling a home most of us will also be buying another, whether it be upsizing due to having an additional house member, or downsizing for retirement. The equity released from the sale of your house will be used for your next purchase. If the house you are looking to buy is more valuable than your equity and savings, then it can be used as a deposit for your next mortgage, in some cases reducing monthly payments and increasing borrowing amounts. If the value of your new home is less than the equity, the remaining can be used to save for retirement or even invest.
Getting the most equity out of your property is essential and there are some ways you can help increase the equity you receive from a property sale. Cutting costs is a major way of increasing your equity, there can be many fees when selling a property like estate agents and solicitors fees.
For those looking to sell their home in the quickest, cheapest and most convenient way, you are in the right place at FastCash4Houses. With us, you can sell your property in a quicker time frame with no estate agent or legal fees to pay. To get your free no obligation valuation today and to find out more about how we can help then visit our website at https://fastcash4houses.co.uk/ or get in contact with us to speak to a member of our team directly on 01204 294356 or [email protected]. At FastCash4Houses, we want to support you every step of the way as you sell your property.
Get Your Instant Cash Offer
Please fill out the form below
Get a free cash offer within 24 hours
Fast house sales in as little as 7 days
We pay all fees