How Do I Build Equity In My Home?

How do I build equity in my home? Read here for tips on how to maximize the equity you have within your home!!

For most individuals the largest asset they have is their home. Unfortunately for many, it is also their largest liability and many homeowners today have little or sometimes negative equity in their homes. There are a few ways to build equity within a home, the easiest of which are discussed in this article.

Put Down a Larger Down Payment

A simple way of building equity in a home is putting forth a larger down payment. A larger down payment will instantly give the home owner more equity. It will also decrease the amount of interest paid over time, which in turn will build a homeowner’s equity.

Pay Down the Mortgage Faster

One good way of building equity in a home is to pay down a mortgage faster. Mortgage interest is very heavy at the beginning of a loan. Until the 21st year of a 30-year mortgage, a homeowner is paying more towards interest than principal. For a $200,000 mortgage at 6% interest switching from a 30-year mortgage to a 25-year mortgage will cost $89 more per month, but will lead to $6,500 more equity for the homeowner after the first five years of mortgage payments.

Home Improvements and Upgrades

Another way of building equity within a home is to improve the home with upgrades. The most popular upgrades to a home are rehabbing kitchens and bathrooms. These projects are expensive, but have the highest return on investment. Other projects which help improve the home’s value and build equity are adding a new bedroom, finishing a basement, or building a deck. To maximize the equity, someone should not rely on a line of credit to complete the project.

How Do I Build Equity In My Home?

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