How to Build Great Equity

Written by on November 29, 2012 in Money - No comments | Print this page


Building equity in your home is another smart way to save money, and who can argue with that? The more equity you create for your home, the more it is worth. So how does it work?

When people think of building equity, they immediately think of paying off their mortgage loan. Yet, there are other ways you can build equity for your home as well.

Equity is the difference between the balance of your loans and the price of your home’s market value. Although the value of your home can be affected by the geographical aspects (the quality and location of the town, school districts, community features, etc.), there are other things when it comes to building home equity that you have more control over. Over the years, there are different ways in order to build a solid equity by growing the appreciation in the property value and paying off the mortgage.

When making the initial purchase of your home, the best way to begin the process of building equity is to make the largest down payment that is affordable for you. Automatically, your money is going into your home instead of sitting in the bank where it is money you might spend on other things.

The best thing you can do when you get your bills, mortgage and other loan payments is to look at the minimum payment. Determine how much extra money you can afford to set aside each month so you can pay more than the minimum amount that’s required. In doing so, this will help reduce your loans and bills faster. This also means you are losing less money to interest payments each month. The faster you pay down debt, the more equity builds in your home.

Everyone has a different mortgage term. The most common mortgage term length you will see is 25 years. At first, you are more likely to want a longer term mortgage loan because it gives you more time to pay it off. Yet, the whole idea is trying to pay off your mortgage loan in order to build equity.

If you are in the process of getting a mortgage, again, determine what your finances are and see if you can afford one that is only 10 or 15 years. If you are already in a long-term mortgage contract, see if you can refinance and get a shorter term. A shorter mortgage term will mean higher monthly payments, but you will be paying off your principal faster, meaning you will be building your home equity faster as well.

Consider how in-shape and updated your home is. Are there rooms that can be updated? Are there appliances or other items that can be replaced or repaired? Over the years, houses become outdated and require maintenance to continue running properly. For example, maybe the water heater hasn’t been replaced in years and a newer, more efficient one can be installed. Many houses nowadays have energy-efficient windows. Gutters need to be cleaned and the property needs to be maintained.

Doing any type of home improvement will help increase the value of your home. The best place to start is the kitchen and bathrooms as this is where prospective buyers expect to see the most up-to-date features. Explore other areas of your home that are not currently being utilized to the best of their potential. Is there an unfinished basement that can be turned into a playroom or another living room? Some houses have screened in porches that can be renovated into seasonal rooms that can be used all year round.

Renovating and updating your home creates a newer more modern feel for your house. Yet, not all home renovation projects have to be as big. Smaller projects can go a long way as well. A fresh coat of paint can make a room look like new. Replace cabinets and doors with new handles. Look into updating or installing light fixtures inside and outside the home. Eliminating outdated features will make your home more appealing to buyers.

With consistency, diligence and a little budgeting, you’ll be on your way to building a great home equity.

This is a guest post.  This article was written by the Equity Valuations Expert at

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