Your home equity can play a major role when you move. It can help fund your next deposit, reduce the amount you need to borrow and shape your next property budget.
In simple terms, equity is the difference between what your home is worth and what you still owe on your mortgage.
However, the amount of equity you have on paper is not always the amount you can use for your next property. Selling costs, legal fees, estate agent fees, removals and other moving costs can reduce the cash available after your sale completes.
Before you estimate your equity
- Equity is the difference between your property value and your remaining mortgage balance
- Your home value may be based on an estimate until you receive an offer or valuation
- Selling and moving costs can reduce how much equity is available for your next deposit
- Using more equity as deposit may reduce your mortgage and loan-to-value
- Keeping some cash aside can help with moving costs, repairs or unexpected expenses
What is home equity?
Home equity is the part of your property value that you own after your remaining mortgage balance is taken away.
Equity can increase if your property value rises or if you pay down your mortgage balance. It can also fall if property values decrease or if you borrow more against your home.
When moving home, equity is important because it can often be used towards the deposit for your next property.
How to calculate your home equity
To estimate your equity, you need two main figures: your property value and your remaining mortgage balance.
Estimate your property value
You can start with recent sold prices, estate agent valuations or online estimates. However, these figures are only a guide until you receive an offer from a buyer or a valuation.
Check your mortgage balance
Your remaining mortgage balance is the amount you still owe your lender. You can usually find this through your mortgage account, annual statement or by asking your lender.
Subtract your mortgage from your property value
Once you have both figures, subtract your remaining mortgage balance from your estimated property value.
Estimated property value − remaining mortgage balance = estimated equity
This gives you a starting point, but it does not yet show how much cash you may have available after selling and moving costs.
How home equity could work when moving
Home equity can be easier to understand when you compare your estimated property value with your remaining mortgage and likely moving costs.
How the numbers could look
Current home
Existing home value: £300,000
Remaining mortgage: £180,000
Estimated equity before costs: £120,000
Cost to allow for
Estimated selling and moving costs: £8,000
Equity available after costs: £112,000
Next home
New home price: £400,000
Equity used as deposit: £100,000
Cash left after deposit and costs: £12,000
Mortgage needed for the next home: £300,000
What this shows
The homeowner has £120,000 in estimated equity before costs. After allowing £8,000 for selling and moving costs, they have £112,000 available.
In this example, they use £100,000 as their next deposit and keep £12,000 aside for other moving costs or cash reserves.
Your equity figure is only a starting point. Before using it as your next deposit, it is worth allowing for estate agent fees, legal costs, removals, mortgage charges and any cash you want to keep available after completion.
This is only a simplified example. Your actual position will depend on your property value, mortgage balance, sale costs, moving costs, lender criteria and how much cash you want to keep available after completion.
Equity vs deposit: what’s the difference?
Although equity and deposit are closely linked, they are not always the same thing.
Equity
Equity is the difference between your home value and your remaining mortgage balance.
Deposit
Deposit is the amount you put towards your next property purchase.
If you are moving home, your deposit may come from your equity after your sale completes. However, you may not want to use all of your equity as deposit, especially if you need money for moving costs, repairs, furniture or savings after completion.
How equity affects your next mortgage
Your equity can affect your next move in several ways.
Borrowing amount
The more deposit you can use from your equity, the less you may need to borrow for your next property.
Loan-to-value
Loan-to-value, or LTV, compares your mortgage amount with the property value. A larger deposit may reduce your LTV, which can affect the mortgage options available.
Learn more: Loan-to-value explained.
Monthly repayments
Using more equity as deposit may reduce the mortgage amount, which could reduce your monthly repayments. However, your repayments will also depend on the rate, term and mortgage structure.
Cash flexibility
Keeping some equity as cash after your move may help with repairs, furnishings, emergencies or other plans. However, using less equity as deposit may mean taking a larger mortgage.
This is why the right amount of equity to use is not always the maximum amount available.
Should you use all your equity as deposit?
Using all your equity for your deposit is not always the right approach. It may reduce the mortgage you need, but it could also leave you with less flexibility after you move.
When using more equity may help
Using more equity towards your deposit may help if you want to reduce your mortgage amount, lower your loan-to-value or keep monthly repayments more manageable.
When keeping cash aside may help
Keeping some cash aside may be useful if you expect moving costs, home improvements, repairs, furniture costs or other expenses after completion.
The right balance depends on your wider budget, borrowing needs, savings and how comfortable the new repayments feel. It is worth looking at both the mortgage impact and the cash you want available after completion.
Check what your equity could mean for affordability
Your equity gives you a useful starting point, but it does not decide your full moving budget on its own. Your income, mortgage term, interest rate, lender criteria, moving costs and monthly repayments all matter too.
For example, using more equity as deposit may reduce the amount you need to borrow. However, keeping some cash aside may give you more flexibility after completion. The right balance depends on what feels affordable each month and what you want left after the move.
Learn more: How much can I afford when moving home?
Benefits and trade-offs of using equity when moving
Using equity can support your next move, but it is worth thinking about how much to use and how much cash to keep aside.
Benefits
Support your next deposit
Equity from your current home may help fund the deposit for your next property.
Reduce the amount you need to borrow
Using more equity towards your deposit can reduce the mortgage amount needed for your next home.
It may improve your loan-to-value
A larger deposit may reduce your LTV, which can affect the mortgage options available.
Things to consider
Not all equity may be usable
Selling costs, legal fees, removals and other moving costs can reduce the amount available.
Using all your equity can reduce flexibility
Putting all your available cash into the next property may leave less room for repairs, savings or unexpected costs.
Your property value may change
Your equity is only an estimate until your current home sells and the final sale price is known.
How to decide how much equity to use
Before deciding how much equity to use for your deposit, it helps to compare your next move from several angles.
Ask yourself:
- What is my estimated property value?
- How much do I still owe on my mortgage?
- What selling and moving costs do I need to allow for?
- How much deposit do I want to use for my next home?
- How much cash would I like to keep after completion?
- What monthly repayment would feel comfortable?
- Could using more or less equity affect my mortgage options?
The right approach should support your next purchase without leaving you short after the move.
How Muttuo Mortgages can help
Muttuo Mortgages can help you understand how your equity could affect your next move.
We can look at your estimated property value, remaining mortgage, likely deposit, borrowing needs and moving costs. We can also help you understand how different deposit levels could affect your loan-to-value, repayments and mortgage options.
Because Muttuo is a whole-of-market mortgage broker, we can compare options across the market and explain how lenders may assess your move.
The aim is not just to help you estimate your equity. It is to help you understand how that equity could support a suitable, affordable and realistic next move.
Want to understand what your equity could mean?
Muttuo Mortgages can help you compare moving-home mortgage options across over 100 lenders, so you can understand how your equity, deposit and borrowing needs fit together.
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Frequently asked questions about home equity when moving
Here are some common questions about home equity when moving, including how to calculate it, how it can support your next deposit and why you may not want to use all of it.
How do I calculate how much equity I have?
Subtract your remaining mortgage balance from your estimated property value.
To calculate your estimated equity, subtract your remaining mortgage balance from your estimated property value.
For example, if your home is worth £300,000 and your remaining mortgage is £180,000, your estimated equity would be £120,000 before selling costs and other fees.
This figure is only a starting point. Estate agent fees, legal costs, removals, mortgage charges and other moving costs can reduce how much cash is available after your sale completes.
Can I use my equity as deposit when moving?
Yes, equity from your current home can often be used as deposit for your next property once your sale completes.
Yes, equity from your current home can often be used towards the deposit for your next property once your sale completes.
However, the amount available will depend on your final sale price, remaining mortgage balance and any selling or moving costs. You may also want to keep some cash aside for repairs, furnishings, savings or unexpected costs after completion.
A broker can help you understand how different deposit levels may affect your borrowing amount, loan-to-value and monthly repayments.
Is equity the same as deposit?
No. Equity is the value you have in your current home, while deposit is the amount you choose to put towards your next purchase.
No. Equity is the value you have in your current home after your remaining mortgage balance is taken away.
Deposit is the amount you put towards your next property purchase. If you are moving home, your deposit may come from your equity, but you may not choose to use all of it.
For example, you may keep some equity as cash after completion to help with moving costs, home improvements or savings.
Should I use all my equity as deposit?
Not always. Using more equity may reduce your mortgage, but keeping cash aside can help with moving costs and unexpected expenses.
Not always. Using more equity for your deposit may reduce the mortgage you need and could lower your loan-to-value.
However, using all your available cash can reduce flexibility after you move. You may need money for legal fees, removals, repairs, furniture, savings or unexpected costs.
The right balance depends on your next property budget, borrowing needs, monthly repayments and how much cash you want to keep available after completion.
How does equity affect loan-to-value?
Using more equity as deposit can reduce your loan-to-value, which may affect the mortgage options available.
Loan-to-value, or LTV, compares your mortgage amount with the value of the property you are buying.
Using more equity for your deposit can reduce the amount you need to borrow. This may lower your LTV, which can affect the mortgage options available.
However, LTV is only one part of the decision. Lenders will also look at your income, spending, credit profile, deposit source and the property itself.
Can Muttuo Mortgages help me understand my equity?
Yes. Muttuo Mortgages can help you understand how your equity, deposit, borrowing needs and repayments could shape your next move.
Yes. Muttuo Mortgages can help you understand how your equity could affect your next move.
We can look at your estimated property value, remaining mortgage, likely deposit, borrowing needs and moving costs. We can also help you compare how different deposit levels could affect your loan-to-value, repayments and mortgage options.
The aim is to help you understand how your equity, deposit and borrowing needs fit together before you move.
