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4 Ways To Build Home Equity

Updated: May 25, 2023

Home equity is the difference between your home’s fair market value and what you owe on the outstanding balance of all liens. Your home’s equity appreciates when you make payments against the mortgage balance, or when your property value increases.

man using a calculator while holding a pen and paperwork

While there are some ways you can tap into your home equity, you generally create wealth over the years when your share of the property’s ownership increases. Here are 4 simple ways you can build equity in your home.

1.) Increase Your Downpayment

The most reliable and quickest way to build equity is by increasing your down payment when you purchase your home. The equity you create in your home is directly proportional to your initial downpayment.

2.) Increase Your Monthly Mortgage Payments

By making additional payments, or paying above your minimum payment, you’re building equity in the home by paying down the principal. Paying more than the monthly required minimum will help you build equity faster. It will also cut down on the amount of interest you’re paying in the long run because you’ll pay the house off sooner.

3.) Stay In The Home 5+ years

You build home equity if the property increases in value. Your odds by remaining in your residence for over five years and the neighborhood improves over the long term adds value and appeal to future buyers.

4.) Make Home Improvements

By doing home improvements you can add equity to your property. The goal is having a home that is worth more than what you owe on it. Keep in mind that home improvements should be appealing to future buyers and appraisers so don't go over board and consider the price point of the home when making them.

A home is likely the most valuable asset many people own. Building home equity is crucial to homeownership because it helps to provide future financial security. For more tips on homeownership be sure to check out our other blog posts, resource guides and sign up to receive information on our future classes.

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