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Home equity refers to how much you owe on your mortgage compared to how much a home is worth.
The more equity you have, the better deal you could get when you sell or refinance.
You can increase your home equity by either paying down your mortgage or boosting the home value.
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If you’re refinancing, getting a second mortgage, or selling your home, you’ll want to know how much equity you have.
The more equity you have in your home, the better. You have plenty of options for increasing your equity. You can find ways to pay down more of your mortgage, or ways to boost your home value.
What is home equity?
Home equity refers to how much of your home you own, financially speaking. If you have a 10% down payment, you own 10% of your home from day one.
To calculate your home equity, subtract how much you owe on your mortgage from the value of your home. Let’s say your home is worth $300,000, and you still owe $250,000 on your mortgage.
$300,000 – $250,000 = $50,000, or 16.67%
Maybe your home value has increased since you bought it, so an appraisal shows it’s now worth $350,000. That means you have more equity:
$350,000 – $250,000 = $100,000, or 33.33%
You do have some control over how much equity you have. Here are five ways to build more equity in a home:
1. Make a large down payment
If you haven’t bought a home yet, you can gain a lot of equity by taking one crucial first step: make a big down payment.
The minimum down payment you’ll need depends on which type of …read more