Owning a home is a dream of many. Other than reducing your rent and ensuring a decent shelter status, it works as financial savings through home equity.

Home equity is the amount of the home you own free from financing. For example, if your home is worth $250,000 and you have paid off $150,000 then your equity is $150,000.  To help you quickly determine your home’s equality use a tool such as a home equity calculator.

As a homeowner, home equity comes with various benefits like support for borrowing. You can use the home’s equity as security and show your creditworthiness to get the credit. With higher home equity, you are also assured of higher returns in case you sell the house. Better still, building home equity is a way to create long-term wealth. 

Here are some of the top ways to build your home equity. 

1. Make a large down payment 

The first way to gain bigger home equities is by making a bigger down payment. With a big down payment, you get sizable home equity from the start. 

The minimum down payment depends on the mortgage you are taking. Most of the financial facilities will require you to pay around 0 - 20% down payment. Strive to pay more than the minimum to increase your home equity. 

Making a larger down payment also comes with other benefits like reduced interest rates. You will also not have to pay the private mortgage insurance hence you save more. However, assess your financial status and plans before deciding on the down payment. 

2. Choose a short-term mortgage 

Choosing a short-term mortgage is another way to increase your home equity. Most of the home mortgages come with a repayment period of 30 years. However, you don't have to stick to those years. You can opt to shorten the repayment period to maybe 20, 15, or 10 years depending on your finances. 

The lesser the years for repayment, the more you pay on your mortgage, thus increasing the home equity quickly. Even if you take the long-year option at the start, you can still refinance your mortgage after some time to achieve the intended goal. 

3. Improve the property 

The value of your home is never static. You can always improve the home through upgrades and build equity in the process. Most home upgrades are investments that work in creating a better ambience in the home, hence higher.

Still, not all the upgrades have returns on investments. For example, the real estate industry is torn on the value of swimming pools. It requires the property to be in a specific location and target the high-end homeowners for returns. To keep safe, invest in simple upgrades like improving home lighting, updating doors, and painting the exterior. 

4. Pay more on your mortgage 

The other way to increase the home equity is by increasing the amount you repay as the mortgage principal. By increasing the mortgage, you reduce the repayment period, and you own your home quicker.

Paying more for mortgages calls for rethinking your finances. For example, you can have to forfeit some of the less important expenditures, forfeit some luxury, and increase your work hours. Find all the ways you can compromise then enjoy the comfort that comes with fully owning the home. 

5. Wait for the home’s value to rise 

The other way to improve your home’s equity is by doing nothing at all. Instead, stay patient as the value of the home increases. This mostly depends on the location. A developing location with business and other facilities coming up points to better home equity after some time.  That is why location matters when choosing a property.

Bottom Line

Building home equity takes time and requires proper financial planning. However, it is all worth it in the end. With better home equity, you can use it to build your credit rating. Build the home equity you deserve by making a large down payment, choosing a short-term mortgage, or improving the property.