Building Home Equity

You may find yourself wondering what equity is. You hear it on television all the time, but what, exactly, is it? Home equity, in essence, is the difference between the real value of your home and the outstanding mortgage on it. For example: If your house is worth $200,000 and your outstanding mortgage is $175,000, then you have built $25,000 of equity. For the record, the value of your house must be based on Comparative-Market Analysis, not on what you wish or hope your house is worth.

So, you build equity by merely paying your mortgage payments, which you have to do anyway. As you pay off the mortgage, you begin to own more of the house. All the while, the value of your home should be rising. Because you are gradually owning more and more of the house, which is in turn increasing in value, you are essentially making more money than you are paying through the mortgage.

How to Build Your Equity

There are a few things you can do to jump-start your equity, such as:

• A higher down payment. By paying more at the beginning, you start off owning more of the house. Instant equity!
• More principle payments. By increasing the amount you pay each month on your mortgage, you are paying off the mortgage faster. This has two big benefits: not only do you own more of your home sooner, but you are also reducing the amount of money you ultimately pay due to interest.
• Home improvements. Improving the quality or size of your house increases its value. Do some research to make sure that the home improvement projects you are embarking on will have the maximum effect on your home's value.

Following these steps can help you increase the rate at which your home equity accrues, which can mean a bigger nest egg and an earlier retirement.

Contact Us

If you are thinking of restructuring the terms of your mortgage, contact the Maryland mortgage modification lawyers of Chaifetz & Coyle by calling 443-546-4608.