Equity (2 meanings)

  • Equity 1st meaning
  • The amount of capital (value) remaining in a property after any mortgage loan is deducted.
  • Say you borrow £75k 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.
  • 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 2nd meaningA 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 with clean hands”

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