Build Your Home’s Equity Faster... And Use It to Your Advantage

As a homeowner, when you’re making those mortgage payments month after month, you’re building equity. But what is equity? By definition, it’s the difference between your home’s market value and what you owe on it.

To calculate your home equity, simply subtract the amount that you owe from the value of your home. So, if your home is worth $375,000 and you owe $100,000 on your mortgage, what is your equity?

$375,000 - $100,000 = $275,000 in equity!

EXPERT TIP: Knowing how much equity you have in your home helps you create meaningful financial moves.

How to build equity in your home?

There are plenty of ways to build equity in your home. But since you’re already a homeowner, you can’t make a bigger down payment (which one was way of having equity out of the gate). But have no fear, there are still plenty of ways homeowners can quickly build their equity:

Increase the value of your home

Making updates to your home is always a good idea if you have the means. Those updates will reflect on the overall value of your home. And making those investments now will help your equity when it comes time to sell.

Refi for a shorter loan term

Refinancing has a slew of benefits - lower interest rates and shorter loan terms are two of the biggest ones. Just remember that if you refi from a 30-year loan to a 15-year loan, you’ll likely have a bigger mortgage payment monthly. But the benefit is that you’re likely getting a lower rate and bonus: you’re also building that equity!

Pay more towards your mortgage monthly

While this one seems like it might not be an option for you, let’s look at your circumstances. Have you gotten a raise or promotion since you first bought your home? Did you pay your car off? Maybe one of your kids went off to college or no longer needs childcare. Rather than spending that money on other things, consider putting that that extra money towards your mortgage!

Whichever situation you might find yourself in, if you can budget a few extra dollars towards your mortgage payment each month you’d add to your equity quicker!

What’s next?

If you’re interested in a refi with a shorter loan term or even more tips to build your home equity, our mortgage bankers are ready to help!