Equity is one of the primary reasons to own a home, and it is why real estate is often quoted as a good investment. It is defined as the home’s value and the owner’s total debt to the house, or the portion of the house that the owner has already paid off. Building equity can be a big step towards improving your personal finances and the market value of your home. More equity can mean the chance to borrow more money in the form of a home equity loan, and means you get more profit in the sale of your home that you can put towards your next home. Here are some ways to increase the equity on your home.
Increase your Down Payment – The down payment you make on your home is the first step you take towards building equity. The amount of equity you earn is exactly your down payment amount, so a 20% down payment means you earn 20% equity. For this reason, if you can put down a bigger down payment, you can instantly earn more equity.
Mortgage Payments – When you make a mortgage payment, it includes a portion of the principal of the loan and the interest. The principal portion goes towards building your home equity, and it increases with every payment. If you can afford it, making double payments will speed up this process and get you more equity faster.
Home Improvements – Any improvements you make to your home that up the resale value will also increase your equity. Landscaping, updated appliances and fixtures, and adding energy-efficient appliances can all boost your home’s resale value and raise your equity.
While the real estate market can be responsible for changes in your equity, it is a good idea to keep on top of these 3 sources so that you can have a level of control over what you are earning towards your home.