Obtaining a mortgage and making a payment that covers the principal and interest portion of your mortgage payment will help you to build equity in your home. Every time you make a payment on your mortgage the portion of your payment that is applied to principal is used to decrease your mortgage balance. This is one way to help you build equity in your home. On a 30 year mortgage it will take you a much longer time to build equity than if you were on a 15 year mortgage. The reason is because on a 15 year mortgage there is a much larger portion of your payment being applied towards the principal portion of your payment and a smaller amount being applied towards the interest portion as opposed to a 30 year mortgage. Therefore while lowering your term can help you build equity much quicker it is not always feasible or affordable to lower your term down to a lower term. Every little bit helps, even a 25 year mortgage vs. a 30 year mortgage will help to build equity and pay your loan down quicker.If you are buying a new home from a developer you can usually arrange to leave a certain amount of the property unfinished. Finishing the property yourself gives you what is called "sweat equity".
Some people choose interest only loans. By paying interest only you have a reduced payment but build no equity.
Another way to build equity is to buy an under-valued home in an appreciating neighborhood.
This involves speculation so be careful not to depend on appreciation in order to make your payments.
Speak with your Preferred Realtor or Mortgage Broker for tips on how to buy a home for less than full market value.
You can also build equity faster by making a down payment on the purchase of your home or making extra payments to your mortgage principal.
You can also opt for bi-weekly payments on your mortgage instead of paying once a month to build equity faster. Another way to build equity is to making is to make improvements that add to the value of your home. But you must outweigh the costs associated with making those upgrades to how much value it will add to your house.
