Equity (2 meanings)
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.
- Think of the name S.I.D.:
- 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"
Published: 5 November 2013 Last Updated: 27 November 2021