How to Create Equity

If you own a home, a huge chunk of your wealth lies in the equity. Unfortunately, it can take years to grow equity. To benefit from the investment, you may have to live in the property for years. Yet, there are ways to grow equity fast.

Things You'll Need

• Down payment

Instructions

1. Purchase a home with a down payment. You can put a down payment on your new home and enjoy instant equity. Although lenders willingly approve borrowers for 100 percent financing, they prefer applicants with a down payment. Even if you can’t afford the traditional 20 percent down payment, attempt to save at least 3 to 5 percent of the purchase price.

2. Choose a bi-weekly mortgage loan. The average home loan has a 30-year term. Yet, you can pay off the balance early and grow equity fast with a bi-weekly mortgage. Make a mortgage payment every two weeks and save money on interest.

3. Make one extra mortgage payment a year. If you don’t want to commit to a bi-weekly mortgage, attempt to make an extra payment once or twice a year. Tell the lender to apply the extra payment to the principal balance only.

4. Buy a home in a new development. One of the best ways to grow equity fast is to purchase a home in a new housing community. Phase one homes are typically cheaper. However, once the builder completes the development, the homes are usually worth thousands more.

5. Renovate or improve the property. Making minor and major home improvements can boost your home’s value. In turn, your equity increases. Complete a kitchen or bath remodel, make a home addition or put in a new swimming pool.