The Best Ways of Getting Equity in Your Home

You may hear the term "home equity" mentioned when it comes to personal finance or home mortgages. Equity is how much value you have in your home minus the amount you still owe on your mortgage and any liens that may be against the property. So if your home is worth $100,000 and you have $50,000 left on your mortgage, then you have $50,000 in equity available in your home. If you have a $10,000 tax lien on your home then your equity drops to $40,000. There are a few strategies you can use to raise your home equity value.

Improvements

The higher the assessed value of your home, the greater the amount of equity you have in it. So it stands to reason that the more home improvements you make, the greater your equity. Some home improvements add more value than others. New siding, new hardwood flooring and new landscaping can do a lot to raise the value of your home. If you are looking to add significant equity to your home then add a new section to the house and raise the appraised value significantly. While little fix-ups here and there will help, to raise the equity in your home you should consider doing significant remodeling.

Pay Down Your Mortgage

As mentioned earlier, one of the main factors in calculating equity is the amount of money owed on your mortgage. The less you owe on your mortgage, the more equity you will have. This is one of those times when a little here and there can go a long way toward helping you build greater equity. Try paying an extra 10 percent of your monthly payment each time you apply money toward your mortgage. If you pay $1,000 a month now, try paying $1,100 instead. At the end of the year that extra $1,200 you paid can help to increase the equity value in your home.

Reappraisal

Asking to have your home re-appraised by the local tax authorities can be a double-edged sword. If they agree that your home is worth more money, then your home equity value goes up. But your taxes will go up as well. This is one of the drawbacks of gaining more equity in your home. You will have the benefit of being able to tap into your home equity when you need the funds, but you will also have to pay more to your local tax accounts as well. However, a reappraisal that raises the value of your home instantly adds equity value.