Equity in Property

• The amount of capital (value) remaining in a property after any mortgage loan is deducted.
• If you borrow £100k and
• You provide £25k deposit.
• 75% LTV = 75% of debt you owe to the lender and
• 25% of the deposit is the amount you provide to buy a property.
• In this instance the 25% is known as the equity or the amount remaining after any loan is deducted.
• A direct repayment mortgage means
  • the loan decreases inversely whilst the equity increases (amortization).
•  An interest only mortgage in contrast is where
  • The loan remains the same for the term of the loan.
  • The equity could, but is unlikely to, remain the same.
  • The equity can vary with house price value fluctuations via
    • economic circumstances or
    • improvements made to a property via
      • renovations or
      • dilapidations experienced by the lack of maintenance.

Equity in Law

• A branch of Common Law
• Equity is about fairness.
• Under the rules of equity a judge can award 3 remedies:
  • Think of the name S.I.D.:
    • Specific Performance by discretion
    • Injunction by discretion
    • Damages as a right
  • Where there is a conflict between common law rights and equity then equity always prevails.
• Equity is a discretionary remedy, not an automatic right or entitlement.
• Parties acting without integrity are unlikely to be permitted to rely on equity as a remedy.
• I.e. "Equity must come (to court) with clean hands"