How to Build Your Home Equity

Home equity refers to the value of your home’s financial interest. In other words, it refers to your property’s actual market value compared to how much you owe your mortgage.

The amount of home equity varies as time passes as the market forces affect the property’s value and more payments are made on the mortgage.

The more equity your property has, the better deal you will get when you eventually refinance or sell. Home equity is much more than a mortgage being paid off. A home is considered a big investment since a home equity is an asset that you can borrow against to meet certain financial goals like paying college tuition or paying off high-cost debts.

So, if you are getting a second mortgage, refinancing, or putting your home up for sale, you will want to know how much home equity you have and learn how to build equity in your home.

There are ways how to boost the value of your home or pay down more of your mortgage. Yes, you do have some control over how much home equity you have. Below are some tips.

Secure a huge down payment

Haven’t purchased your home yet? You can gain plenty of equity by taking this simple and crucial first step: secure a huge down payment.

The minimum amount you can pay off as downpayment will largely depend on the kind of mortgage you’ll get. Typically, you would need between 0 to 20 percent. However, if possible, it is recommended that you place more than the minimum, since the bigger the downpayment, the more equity you’ll have in your house from the outset.

Making a big down payment comes with other advantages. For instance, lenders normally give better interest rates as a reward to those who make bigger downpayments.

Select a shorter-term mortgage

A typical mortgage has a 30-year term. However, you can choose to pay off your mortgage with a shorter term – between 10 to 20 years. By paying off your mortgage more aggressively, you’ll own your home in full sooner.

Providing you already have an existing mortgage; you have the option to refinance into a loan with a shorter term.

Pay down your mortgage

You gain more equity in your home each time you make a monthly mortgage payment. This means that you’ll have more equity in your home after making a few years of making payments compared to when you started.

Making monthly payments is one way of building equity. However, if you want to make significant progress, you have the option of paying extra toward your mortgage.

Making enhancements in your home

Making home improvements can boost your home’s value. As your home gains value over the years, the more equity you’ll have.

Perhaps you want to boost your home’s value so you can sell it at a higher price in the future. Some home renovations entail a lot of money; however, some home projects are relatively affordable. For instance, you can update some lighting fixtures or you can give your home a fresh coat of paint.

Wait for home values to increase

Your home can gain value over time, helping you build equity through the years. Perhaps the community has created more jobs for its residents, or the neighborhood has undergone some nice improvements.

As you can see, there are several ways on how to build equity in your home efficiently. Choose the one that best fits your financial situation, and you will be able to reap the rewards when it’s time to sell or refinance.


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“How to build equity in your home,” Bankrate,
“How to Build Home Equity,” CNET Money,
“How To Build Equity in a Home,” The Balance,