How Long Does It Take to Build Home Equity?

You can build equity in your home in a matter of weeks, or it can take years. It all depends on how you go about it. There are a number of things that can cause the equity in your home to increase as well as decrease.

Definition of Equity

The equity in your home is the difference between the market value and the balance owed. If your home is worth $100,000 and you owe $100,000, you have no equity. When you first buy your home, if you pay $20,000 for a down payment, then you will have approximately $20,000 of equity.

Time Frame

If you have no equity when you buy your home and you decide to pay your standard monthly mortgage payments and no more, it may take 10 years to build up equity. The majority of your payments in the beginning stages of a loan will always go toward interest.

Warning

If the value of your home declines because of a slow real estate market, then your equity will also decline.

Home Improvements

Certain home improvements will increase the value of your home and increase the amount of your equity as well. Remodeling a bathroom or a kitchen can have that effect.

Additional Principal

You can add additional amounts of money to your mortgage payment, which will help to increase your equity and pay your mortgage off faster.

References

• What Is Equity?
• How to Build Equity