How to Gain Home Equity

Home equity is the difference between your mortgage balance and your home's worth. For example, if you owe $150,000 on your mortgage loan and your property is worth $200,000, your home's equity is $50,000. There are several ways to gain home equity. Homes gradually gain equity over time. However, homeowners can take steps to build their equity faster.

Instructions

1. Increase your mortgage payments. Pay an extra $100 to $200 a month to quickly reduce your mortgage balance and gain equity in your home. If possible, make one or two extra mortgage payments a year.

2. Choose a bi-weekly home loan. Rather than make one mortgage payment a month, home buyers who choose a bi-weekly home loan make two mortgage payments a month. Pay half on your mortgage on the first and fifteenth of the month. This arrangement reduces the amount of interest you pay. You'll gain equity, and you can pay off your home in 23, instead of 30, years.

3. Refinance and select a shorter loan term. Reduce your home loan term to pay off the mortgage early and build equity sooner. To modify your home loan term, contact your mortgage lender and discuss your refinance options. Reduced loan terms involve higher monthly payments.

4. Make home improvements. Home renovation projects can increase your property's value and help you gain equity. Update your kitchen and bathrooms, improve your home's exterior or add an extra room.

Resources

• GMAC: What Is Equity?
• Our Family Place: Building Equity