The 3 Most Common Ways to Build Equity

Dec 8 2019

This is part of our ongoing series about maintaining and supporting your financial investment through home equity and mortgage refinancing.

Among the biggest benefits of becoming a homeowner is the opportunity to build financial security. Enter: Equity.

Equity is good for several reasons. If you’re paying mortgage insurance, once you get to 20% equity, you should be able to cancel that extra charge on your monthly bill. When you have 22%, the insurance is legally required to end automatically. 

Equity is, after all, the value of your home, minus what you owe for it. So, if you have a 10% down payment when you buy the property, you start with 10% equity. If you took out a loan to pay for the rest, your lender initially owns the remaining 90%. 

Feeling like you want to have more equity? Here are a few ways to increase it: 

Pay extra toward your principal: If you pay more than your regular monthly mortgage payment, such as by paying a bit extra each month or with an extra principal payment per year, you’ll chip away at the total balance and own more equity faster. 

Increase the value of your home: Dreaming of a new kitchen? Go for it! If you make significant improvements to your home, you could increase its value enough to build your equity.

Monitor the local market: A rising market can boost the value of your home above the amount the bank loaned to you. If your home goes up in value, the percentage of its worth that you owe on your mortgage goes down, meaning your equity increases. Have your home appraised periodically to check on its market value.

Now that you know a thing or two about building your equity, here are some more posts that may interest you as a homeowner:


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