How much equity do homeowners have today?
Updated: Sep 29
I guess the first question to ask is what is home equity and what does that mean to you as a homeowner? Then, how much equity do homeowners have today?
Home equity refers to the value of a homeowner's interest in their property. It is calculated by subtracting the outstanding mortgage balance from the current market value of the home. As a homeowner, home equity is an essential financial asset. It represents the portion of your property that you truly own and can leverage for various purposes.
Building home equity over time provides you with increased financial stability, potential opportunities for borrowing against your home's value, and the ability to accumulate wealth through property appreciation. Ultimately, home equity empowers you to make informed financial decisions and maximize the potential of your biggest asset.
What are different ways to build home equity?
There are several ways to build home equity as a homeowner. Here are some key strategies:
1. Making Mortgage Payments: Each payment you make towards your mortgage reduces the loan balance, increasing your equity over time.
2. Home Appreciation: Property values can increase over time, leading to natural equity growth without any additional effort on your part.
The housing market has been kind to home values over the past few years, giving the average homeowner $200,000 in equity as of June 2023, according to a new report from Black Knight Inc.
3. Renovations and Improvements: Making strategic upgrades to your home can increase its value, resulting in higher equity. Focus on renovations that have a high return on investment (ROI) such as kitchen remodels or adding an extra bathroom.
4. Paying Down the Principal: If you have extra funds available, consider making additional payments towards your mortgage principal. This helps to reduce the loan balance faster and accelerates the growth of your equity.
5. Refinancing to a Shorter Loan Term: Refinancing to a shorter loan term can help you build equity faster by increasing your monthly payments and reducing the overall interest paid over time.
6. Avoiding Excessive Debt: Minimizing other debt obligations such as credit card debt or personal loans allows you to focus more resources on paying down your mortgage, accelerating equity growth.
Remember, building home equity is a long-term process that requires consistent effort and financial discipline. It's always a good idea to consult with a financial advisor or real estate professional for personalized guidance based on your specific situation.
Click here to learn how you can pull money out for a home equity loan and how you can use the money!