For homeowners, equity is like an extra bank account. Every dollar you put toward your property gives you a bigger stake in your home, as well as more money to pull from should you need it down the line.
Equity gives you additional funds to tap via a cash-out refinance, home equity loan or home equity line of credit. These essentially turn your equity into cash — money you can use for home improvements, college tuition or even a family vacation.
But how do you get more equity? Here are some things you can do:
- Make a bigger down payment. If you haven’t bought a home yet, the easiest way to get more equity is to put more money down. And depending on the type of mortgage loan you choose, this could also lower your monthly payment or eliminate the need for private mortgage insurance, making your home more affordable.
- Upgrade or renovate your home. Anything that increases the value of your home also increases your equity — and the amount you stand to gain when you sell. Just be sure to choose your renovations carefully, as some offer higher returns than others.
- Pay down your mortgage. The lower your mortgage balance, the more equity you have, so work on paying that loan off sooner rather than later. Try making an additional payment every quarter or dedicating your tax returns and holiday bonuses to the account. It’ll make a significant difference in the long run.