What’s equity?
Equity is the value of your home, minus what’s left to pay on your mortgage.
Your equity increases if the value of your home increases and as you pay off your mortgage. It can also go down if the value of your home goes down.
You can use your equity as a deposit to put towards your next home.
What’s loan to value?
Loan to value (or LTV) is how much you’ve borrowed from your mortgage lender to buy your home, compared with its value. Lenders use LTV and equity when deciding what interest rate to offer you. The lower the interest rate, the less you have to pay back.
Lenders divide their interest rates into loan to value bands. The lowest band tends to be 60% and it goes up in 5% increments to 95% LTV. Being part of a lower band usually means lower interest rates.
How does overpaying work?
Overpaying is when you pay more towards your mortgage than what you agreed with your lender. If you want to overpay, you can make a one-off lump sum or a regular extra payment each month.
There might be limits on how much you can overpay so it’s best to check your options with your lender. You can usually overpay by 10% of your outstanding balance a year. If you overpay more, you might be charged a fee.
