The 3 ways you can grow your home equity

The way to create wealth through home ownership is to build up your home equity.

Equity is essentially the market value of your property, minus what you owe to the bank.

If you‘re paying off the principal of your loan and your property is increasing in value then you should be steadily building up the amount of equity you have.

3 ways to build your equity

  1. Increase your mortgage payments

First off you should make sure that you choose the right home loan so you’re not paying high rates and have features such as an offset account that can help you pay down your mortgage as quickly as possible.

You should also aim to pay as much as possible and put down any windfalls that come your way so you can own your home outright sooner. 

  1. Rely on capital growth over time

Most properties build up equity over time. Unfortunately in can take awhile to get a decent amount of capital growth. If you’re looking for shorter-term gains then you will need to be strategic about where you intend to buy.

If you can hold onto your property for the long-term you may be well rewarded though, as you can ride out any peaks and troughs in the market and potentially see large price increases that could set you up for the future.

  1. Improve the property

Renovating a property is a great way to build equity in your home, particularly if you have some skills or know-how. Simple cosmetic makeovers can significantly improve the value of a home in a very short amount of time. Developing or subdividing a property may be other ways to improve equity.

Trying to build the equity in your home is often worthwhile. If you don’t want to sit around and wait for capital growth then your best options are to find ways to pay your mortgage down as quickly as possible or make smart changes to your home that will improve its value.

You need to be careful when renovating that you don’t overcapitalise though so call up your local real estate agent to get advice about the best improvements to boost your property’s value.

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