Do you want to create wealth through homeownership? Building equity is the way to go. Home equity is the percentage of your home that you own, and it is crucial to building capital through homeownership.

How Much Home Equity Do You Have?

Equity is easy to determine when you buy a home because it is basically your down payment. For example, if you put $11,250 down on a $225,000 home, your down payment is 5 percent and so is your equity in your home.

Starting in 2016 to the first quarter of 2018, most first-time home buyers in the U.S. began with about 7 percent equity. This is encouraging because it shows that you do not need have a huge down payment when buying your home.

How to Build Your Home Equity

Below are six ways you can create wealth through homeownership. Some require time, money, or both. A lender can help you decide what works best for you.

1. Let Your Home Appreciate

The average home value grew from $185,000 in April 2016 to $216,000 in April 2018. If you purchased a home for $185,000 in April 2016 with a down payment of $12,950, your beginning 7 percent equity would have increased to 23 percent by April 2018.

This is calculated by subtracting your current loan balance ($165,600) from your home’s current value ($216,000). Then divide the difference by your home’s current value.

2. Make a Larger Down Payment

You can do this but, as we have seen, waiting to save extra cash can go against your financial interests if you lose the chance to build equity through appreciation.

3. Use Financial Windfalls

Take advantage of work bonuses, family gifts, and inheritances to pay down your mortgage.

4. Make Biweekly Payments

Make mortgage payments every two weeks instead of once a month. Over the course of a year, this will add up to 13 monthly payments instead of 12.

5. Cut Your Loan Term in Half

Take out a 15-year mortgage instead of a 30-year mortgage, and you will build equity twice as fast.

6. Make Home Improvements

New appliances or cosmetic features like paint are unlikely to increase value in your home. Only large improvements like a remodeled kitchen, or additional bathrooms will add meaningful value.

To find your dream home today, call me, Robin Jones, at (402) 750-6683 (MOVE).