Many UK homeowners are drastically undervaluing their home, with their properties actually being worth nearly £50,000 more than they realised, according to a recent survey. Get Quotes For Conveyancing here today

Discover The Hidden Equity In Your Home

A survey of 2,000 UK homeowners who have had their home valued by an estate agent in the past three years, found that just three in ten had an accurate idea of the estimated value of their home, with 45% undervaluing and a quarter overvaluing their property. The figures were discovered after an inaugural Hidden Equity Survey by Zoopla

Those who underestimated the value of their home discovered it was worth £46,305 more than they thought, which equates to around 1.5 times the average UK salary. Similarly, those who overvalued their property were out by around £44,313.

Nearly one in 10 homeowners whose home was worth more than they expected found that it was valued at over £100,000 more, with 40% of these located in London and the south east.

When all the results of the survey are taken into account, the net result is that the average home in the UK is worth £9,470 more than its owner realises. Multiplied by the 25 million private homes in the UK, this indicates that UK homeowners are sitting on up to £237bn of hidden equity. More than one million UK properties could be carrying six figures of hidden equity – unbeknown to their owners.

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What Could This Mean For You?

The survey shows that many homeowners may be in for a nice surprise if they realise the current value of their home. This is particularly significant if you are thinking of selling up as its value could impact the type of new home you choose to move into.

Others may choose to release some of this equity and remortgage their property to free up a sum of money for other purposes.

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How Can I Use The Equity In My Home?

There are several reasons for remortgaging but the main reasons are going to be either releasing or saving money. Maybe your current deal is about to end anyway, meaning you won’t have to pay high fees to change over. 

  • Buy a new home

If you are ready to sell your home, you can use the equity in your current home as a down payment when you buy. Making a large down payment can help shrink the size of your new monthly mortgage payments, since you’re borrowing less.

  •  Home improvements

Home improvements are one of the most common reasons homeowners release equity from their homes. Besides making it more comfortable for you, upgrades could raise the home’s value even more and draw more interest from prospective buyers when you sell it further down the line.

Using Equity is an option to finance large projects like a kitchen renovation that will increase a home’s value over time, as are window and door replacements, loft conversion, or a new roof. Before using home equity for home improvements, always do research to see if the improvement will produce a good return on your investment.

  • High Interest Debt consolidation

Equity can be used to consolidate high-interest debt at a lower interest rate. Homeowners sometimes use home equity to pay off other personal debts, such as car loans or credit cards. This is a popular use of home equity as you are often able to consolidate debt at a much lower rate, over a longer term and reduce their monthly expenses significantly. 

The downside, however, is that you’re turning an unsecured debt, such as a credit card that is not backed by any collateral, into a secured debt- a debt that is now backed by your home, your most important asset. You also risk running up the credit cards again after using home equity money to pay them off, substantially increasing the amount of debt you have.

If you have a significant amount of unsecured debt with high interest rates and you’re having trouble making the payments, it may make sense to consolidate that debt at a substantially lower interest rate, saving yourself money each month. If you have a solid debt payoff plan, using home equity to refinance high-interest debt can help you get out of debt faster.

  • Emergency expenses

If you find yourself in an unexpectedly costly situation, such as massive amounts of work being needed to be done on your home, using equity to do this may be one way to stay afloat. However, this is only a viable option if you have a backup plan or know that your financial situation is temporary.

If you have an emergency and no other means to come up with the necessary cash, tapping into your home equity may be the answer. However, before you take out any equity to cover an emergency expense, make sure there are no other options.

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