Home equity: Why it's important & how to increase it

Dated: October 19 2020

Views: 15

We have all heard that purchasing a home is an investment. That's because you build equity! What is home equity, and how can you increase it to enhance your net worth?

What is equity? How do you calculate it?

Home equity is an asset that comes from owning your home. It is the current market value of your home, minus what you owe. You want to see a positive number. Home equity is essentially the part of your home that you actually "own."

Current appraised value - current mortgage balance = equity

Why is equity important?

Home equity can be a long-term strategy for building wealth. In fact, home equity is usually the most valuable asset a household has. Some people refer to a mortgage payment as a "forced savings," because with each payment you accumulate more equity. In a previous blog post, we looked at the pros and cons of renting vs. buying. When you rent, you will never see the money from your monthly payment again.

In addition to increasing your net worth, holding equity is beneficial for other reasons:

  • You can borrow against your equity and invest. Some people choose to borrow and start a business, invest in more real estate, put a down payment on a new home, or renovate their current property to increase the value of the home.
  • Equity is vital when selling. Holding positive equity in your home will allow you to benefit and profit from your sale.

How do I increase equity?

An increase in equity can come from:

  • Increasing your monthly mortgage payment
  • An increase in market value over time
  • Renovate or remodel your property
  • Making a larger down payment when buying your home

Are you ready to invest in a home? Let Music City Experts help you find the home that is just right for you! Give us a call 615.815.1295 or reach out to us online.

Blog author image

Holden Parker

Meet Holden. Holden is a licensed REALTOR® and serves as the Director of Marketing at Music City Experts. He’s the face behind social media, blog articles, website content, and graphic design for t....

Latest Blog Posts

2020 Christmas Lights In Nashville

It's the most wonderful time of the year! Grab the family and get into the holiday spirit this week with some of Nashville's best Christmas light displays. Of course, in light of everything

Read More

Broker Bites Podcast – Nashville Agent Spotlight

Listen in to Music City Experts' Broker Bites podcast, hosted by Laura Dahl – featuring All Things Nashville Real Estate! This episode is an agent spotlight with Steph Buell! Steph

Read More

Tips for Holiday Home Safety

The holiday season is filled with joy, cheer, and festive times complete with decorations, twinkly lights, trees, and yummy food. These set the perfect holiday mood, however, they pose hidden.

Read More

Most Affordable Nashville Suburbs

Voted as one of the friendliest cities, it's no wonder Nashville is among the hottest, most lively cities in the United States right now. Buying a home or renting in Music City can be quite pricey.

Read More