Here’s Why Building Equity in a Home is a Good Thing

Building equity in a home is a good thing because:

1. Financial security and wealth building

• Growing asset: Equity in a home typically increases over time, making it a valuable component of your overall wealth.
• Safety net: Home equity can serve as a financial safety net in uncertain times, offering peace of mind.

2. Opportunity for future investments

• Leverage for loans: Home equity can be used as collateral for home equity loans or lines of credit, providing funding for large expenses like home renovations or college tuition.
• Investment in other properties: It can also be the stepping stone to investing in additional real estate, expanding your investment portfolio.

3. Improved credit standing

• Evidence of financial responsibility: Consistently paying down a mortgage and increasing home equity demonstrates financial reliability, potentially improving your credit score.
• Better loan terms: A strong credit history can lead to more favorable terms on future loans, including lower interest rates.

4. Retirement planning

• Asset for retirement: For many, a home is their largest asset. Building equity can play a crucial role in retirement planning, providing options for downsizing or reverse mortgages to supplement retirement income.

5. Flexibility in future housing decisions

• Greater buying power: When moving or upgrading, substantial equity in a current home can significantly contribute towards the purchase of a new home.
• Ease in transition: Equity can provide more options and flexibility when considering future living arrangements, whether it’s buying a larger home or relocating to a different area.

6. You’re not paying rent

• Investing in yourself, not someone else: When you pay a mortgage, you’re increasing your own equity, not paying rent which contributes to a landlord’s equity.
• Long-term personal investment: Owning a home is a long-term investment in your future, whereas rent payments offer no return after you move out.

Along with the obvious benefits on this list, one that can’t be measured in dollars is the personal satisfaction and feelings of accomplishment that come with homeownership. Having your own home is often called the American Dream, but it’s a dream for families throughout the world — one that can play a pivotal role in changing the course of lives.

If you’re already a homeowner, it’s likely you have discovered other reasons why building equity in a home is a good thing.

Yes, You Can Buy Before You Sell. Why Move Twice?

Through our Buy Before You Sell program, HomeLight can help you unlock a portion of your equity upfront to put toward your next home. You can then make a strong offer on your next home with no home sale contingency.

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How can I find out how much equity is in my home?

Here are a few methods to help you determine the equity in your home:

1. Review your mortgage statement: Your latest mortgage statement will show your current mortgage balance. Subtract this amount from your home’s estimated current value to determine your equity.
2. Get a professional appraisal: Hiring a professional appraiser will provide you with the most accurate assessment of your home’s current value.
3. Consult a real estate agent: Real estate agents can provide a comparative market analysis (CMA), which compares your home to similar properties in the area to estimate its value. Many agents will provide a CMA at no cost.
4. Use online tools: Online estimators can offer a quick and easy way to get an approximate value of your home. If you’re curious about what your home is worth, visit HomeLight’s Home Value Estimator. By answering a few simple questions, you can receive a ballpark value estimate today. This can be a great starting point to explore your options and plan for the best price when you’re ready to sell.

Ways to build equity in your home

1. Make a larger down payment: Start with more equity by putting down a larger initial down payment when you buy your home.
2. Opt for shorter mortgage terms: Choosing a 15-year mortgage over a 30-year mortgage can build equity faster.
3. Make extra mortgage payments: Pay more than the minimum or make additional payments to reduce your mortgage balance quicker.
4. Refinance to a lower interest rate: Lowering your interest rate can help you pay off the principal faster, increasing equity.
5. Improve and renovate: Enhancing your home’s value through renovations and upgrades can significantly boost equity.
6. Maintain your home regularly: Regular maintenance prevents value depreciation and helps retain or increase your home’s value.
7. Wait for property values to increase: Over time, real estate generally appreciates, naturally increasing your home’s equity.

»Learn more: See this list of upgrades that will add value to your home.

Use your home equity to purchase your next house

If you’re considering using your home equity to buy another property, explore HomeLight’s Buy Before You Sell program. This innovative program allows you to tap into your home’s equity to secure your next home, without the stress of having to sell your current home first. It’s an ideal solution for bridging the gap between selling and buying, giving you the freedom to make your next move on your terms.

If you’re interested in receiving a CMA to check your home’s current equity, HomeLight can connect you to a top-rated real estate agent in your market. Their expertise can guide you in understanding your home’s current value, how to leverage your home equity, and the best strategies to buy or sell a home.

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