The equity in your home is the difference between what your home is worth is today’s market and how much you currently owe on your mortgage. For example, if your home’s current appraised value is $200,000 and you owe $100,000 on your mortgage you have $100,000 in home equity. Your LTV or loan-to-value would be 50% LTV.  If you currently owe $220,000 on your mortgage you would have negative equity. That is not an uncommon problem right now.

You can build equity slowly over time or speed up the process. How can you put your home equity to work for you? The current real estate slowdown will eventually pass and when the housing market recovers homes will begin to appreciate again.

One option is to put a larger down payment on any home you plan to purchase. You start out with greater equity.

Another option is to keep your home well maintained and stay on top of all needed repairs. That is a must if you don’t want to lose equity. Then consider upgrades for your home. There can be significant differences in the appraised value of “model-matched” homes because of upgrades and condition between the two. Check with local real estate agents and property appraisers to learn which home improvements give you the greatest bang for your buck. 

Refinancing to a shorter term mortgage is a very common action taken by people actively looking to build home equity faster. There are several hidden factors in refinancing that may need to be considered to determine if this common strategy is best for one’s financial goals and needs. For many who do have negative equity this is currently not an option.

There is another option available today to be proactive in building home equity while avoiding the pitfalls of a potential refinance.  Learn more about a comprehensive personal finance software program to build home equity even in a down market. Don’t give up hope. Options are out there. It is always a win to increase your net worth by building greater equity.