6 Tips To Building Equity In Your Home

6 Tips To Building Equity In Your HomeOne of the best way to build wealth is by building equity in real estate.  What is equity?  Think of your home as a pie shape, the more you pay down your mortgage or increase the value in your home the more of the pie you own and that’s called equity.  Furthermore equity is defined as the value of the home in today’s market minus the balance owed on your mortgage.  In today’s article, 6 Tips To Building Equity In Your Home we’ll discuss how to build equity the smart way without busting your budget.

6 Tips To Building Equity In Your Home

What’s my current equity?  Getting an exact amount on your equity is nearly impossible because you have to know the exact value of the property.  Until you put your home up for sale and it closes you won’t really ever have a 100% understanding of what your exact value is.  After all, the true value of something is what someone will actually pay for it so if an agent gives you a valuation and it’s more than it sells for then your equity position would be inaccurate.  Likewise, if the property sells for more which does happen in busy markets.  Going forward and for the sake of this discussion it’s safe to discuss proposed value which would be the value from an agent or appraiser.

Now, on to our six tips to build equity in your home…

The first and most obvious tip is to let your home appreciate over time.  There are many factors that can play a part in determining the length of time needed to appreciate a home, some factors are location, housing market and demographics just to name a few.  Letting your home appreciate is much like letting a savings bond mature, you just need to have patience.  Unlike a savings bond though you can do things to your home to increase it’s value even more while waiting for the appreciation to occur.  Things like enhancing curb appeal, adding solar and updating kitchens and bathrooms are all ways to add value to your home and thus increase your equity.

Secondly, when buying a home make a bigger down payment.  Equity is always defined as an amount but the rate at which equity is grown will always be a percentage also known as market growth.  With that being said it may not be in your best interest to wait a longer period of time if the market growth for your area is higher than normal.  If it is higher then your best bet is to purchase a home with a low down payment and ride the appreciation wave so as not to lose out on the opportunity of growth while saving for your larger down payment.

Throw money at your mortgage.  Did you get a bonus at work or maybe an inheritance?  Instead of putting it in the bank where you’re most likely to spend it, pay down your mortgage and own more of the pie.  Some lenders may even adjust your payment based on a large payment towards principle so don’t be afraid to call and ask.

Our fourth tip in 6 Tips To Building Equity In Your Home is to make a payment every two weeks on your mortgage.  To clarify, you’re not paying two months mortgage payments you’re still only paying one months payment amount but you’re paying half the amount every two weeks.  Sounds crazy right, listen to this.  Over a years time you’ll actually make an additional payment and it’ll shave years off your mortgage!

Another tip is to opt for a 15 year mortgage instead of 30.  Our fifth tip is a bit tough though because this actually commits you to paying a higher payment per month which also may make it more difficult for you to get qualified to buy the home.

Our sixth and final tip is to enhance your home.  Remodel your kitchen, add new appliances.  Put in a nice pretty bathroom, add some neutral paint and flooring.  These are all items that can increase your value and if your value increases so does your proposed equity.

Lastly, what good is knowing about 6 Tips To Building Equity In Your Home if don’t know how to use the equity?  In order to tap into the equity of your home you’ll need to either borrow against it via a refinance loan or home equity line of credit or sell the home.


Hopefully our 6 Tips To Building Equity In Your Home helped you better understand ways to increase your homes value and build more equity.  As always, if you have additional questions on this topic please feel free to contact us anytime or leave a comment below.


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