UK finance jargon - in plain English
The portion of your property that you actually own outright.
Equity is the difference between what your property is worth and what you still owe on your mortgage. If your home is worth £300,000 and your outstanding mortgage is £200,000, you have £100,000 in equity. Equity grows in two ways: as you repay your mortgage and reduce the outstanding balance, and as the value of your property rises over time. Equity matters when remortgaging, as a higher equity position usually means access to better rates.
You bought a home for £250,000 with a £25,000 deposit and a £225,000 mortgage. Five years later the property is worth £275,000 and your outstanding mortgage is £205,000. Your equity is now £70,000, which is a much stronger position than when you started.
Property values can fall as well as rise. Equity is not guaranteed to grow, and if property prices drop significantly you could end up in negative equity, where the mortgage is worth more than the home.
People think of equity as free money they can dip into easily. Releasing equity usually requires remortgaging or taking a further advance, both of which involve costs and affordability checks.