As of 2022, the rate of homes currently occupied by owners is at 65.9%. This number is at an all-time high since 2011. With the number of homeowners currently on the rise, this means that there will be more prospective buyers in the future. This also means that homeowners should start to pay closer attention to the housing market, which will directly impact your home’s equity. Home equity is the monetary difference between your home’s current estimated market value and what you owe on your mortgage. Whether you’re a prospective buyer or a curious homeowner, here are four ways you can improve your home equity:

1. Start strong with a large down payment.

This one is short and sweet, though it does require a bit of money management. Increasing your down payment will put more equity directly into your home. This will also allow you to get a good foothold on paying off your mortgage. Buying a home worth $200,000 and paying $15,000 will bring your home’s equity to $15,000.

2. Pay your mortgage.

It’s important to first understand how mortgage payments work. In the beginning, when you pay your mortgage a small percent will go toward paying off the principal amount while the rest is split between property taxes, interest, and insurance. But as you continue to pay off your mortgage, more and more of your payments will go into reducing the amount you owe. This will continuously build your home equity.

However, note that not all home loans are created equal. Be sure thoroughly discuss your mortgage options to understand which ones will go into helping you pay off your loans and which ones will pay off everything else.

3. Look into home improvement projects.

Renovations can be a great way to improve your home’s equity as well as make it feel more personalized for you to live in. Intentional and well-budgeted projects can improve your home’s curb appeal and draw potential buyers. However, not only do you have to be mindful of any neighborhood stipulations (HOA, zoning, etc.), you’ll want to be sure that your home improvement projects don’t inadvertently lower your property’s value.

Landscaping, adding more bedrooms, and updating the lighting around your house will make it a must-have for prospective buyers. On the flip side, converting a garage and larger remodeling projects in the kitchen or bathroom can have the reverse effect. Not having access to a private garage especially in places where outdoor parking isn’t particularly common can be a dealbreaker for buyers.

There are many factors to consider when it comes to renovation projects such as trends in your area, the budget required, the age of your house, and most importantly, the current value of your home.

4. Weigh out the loan term options.

In this vein, there are two types to consider—short-term and long-term options—and your budgetary needs might sway you into one of these two options. They come with their own pros and cons, but the broad strokes are that:

- A long-term mortgage, the most popular being 30-year, will have a lower monthly payment but will have interest rates, and

- A short-term mortgage is the opposite with higher monthly payments but lower interest.

Typically, the short-term, which can be 10-, 15-, or 30-year mortgages, will allow you to steadily put more money into your principal balance and allow you to build more equity.

It must be stated again though that not all loans are created equal, and choosing one that’s right for you can be difficult to wrap your head around. Buying a home is a major milestone and can offer a greater sense of freedom and security. Solarity Credit Union has a new home loan assistance program built to guide its members along through this process.

Visit any of our local offices to talk with an expert and start your path to homeownership today.