If you’re a homeowner, building home equity can make a big difference in your future finances. Unlike other large purchases such as cars that lose value over time, homes steadily increase in value when you treat them right.
What is home equity?
In short, home equity is the amount of your home that you own. To calculate equity, subtract your mortgage balance from your home’s market value. So, if your house is worth $300,000 and you owe $200,000 on the principal, your current home equity is $100,000. Building equity is important to plan for future expenses, including remodeling your house, buying another home, paying college tuition, and saving for retirement. Essentially, the more equity you have, the more wealth you will build and the more money you will be able to borrow from lenders. Ready to build your home equity? Follow these steps to get started.