A home is a unique financial investment–it’s a place to build memories with family and friends, as well as an important part of establishing a healthy financial future.  Home equity can come in handy for many future investments and changes in your financial status: planned (like retirement) and unplanned. The faster you build equity in your home, the more you’ll have to work with in less time.  Easier said than done, right? Not exactly. Here are some straightforward strategies and guidelines to boost your equity-building pace.

Before we start, let’s review the fundamentals…

Home equity is determined by the difference between the present value of your home and the amount of your remaining mortgage debt.

When describing how to build equity in your home, keep in mind that this process happens long-term (read: decades).  The majority of people need to take out a home loan to afford the house they choose to buy. This means that initially, you own only part of your home, while the bank owns the rest.  Making your monthly mortgage payments effectively chips away at the amount of debt owed on your property to the bank, increasing your ownership stakes (and equity), accordingly. If the value of your property goes up, this also boosts your share of ownership.  

At this point, we can identify the two components of the home equity-building formula.  They are:

  • The rate at which you’re paying off your mortgage
  • The net increase of your home value since you bought it

Using the right strategies, it’s entirely possible to influence both these factors in your favor to expedite the process of accruing equity.  Here are 4 ways to tackle both.

Rana Khanjani, MBA
San Fernando Valley Iranian-American Real Estate Agent

Providing Services in English and Farsi

Phone: 818.723.9071
Email: Rana@YourRealtorRana.com
Address: 22020 Clarendon St. 200, Woodland Hills, CA 91367