The Importance Of Understanding Your Home’s Equity

The Importance Of Understanding Your Home’s Equity

Becoming a homeowner is one of the best ways to help you boost your financial situation; as your home equity increases, your debt can develop into a valuable asset. If you are a homeowner in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, and have questions about how you can utilize and increase your home equity, Foundation Mortgage is here to help. Read on to learn more about the importance of understanding your home’s equity and how it can benefit your finances.

What Is Home Equity and How Does It Work?


Your home’s equity is essentially the part of the home that you have already paid off. It can be calculated by subtracting the current market value of your home by the amount that you still owe on your mortgage. You increase your home equity when you make payments on the principal of your loan and when the market value increases over time. Building up your home equity can be a lengthy process and is a long-term investment. The wealth that you earn from your home equity is created over several years and can help you boost your net worth. You can also use your home equity as collateral for a line of credit or a loan. You can borrow against the value of your home with a home equity loan or a home equity line of credit, (HELOC). A home equity loan offers a borrower a lump sum of funds, and a HELOC lets a borrower draw from an available balance like a credit card.

When Does Home Equity Increase?

To build your home equity, you need to reduce the amount that you owe on your mortgage, and due to a strong housing market in 2021, the average homeowner gained over $55,000 in home equity. Some ways to increase your home equity include:

  • Making your monthly mortgage payments consistently on time.
  • Making extra payments and paying more than the required amount due when you can.
  • Making a large down payment. If you are able to make a 20% down payment, you will not be required to pay private mortgage insurance, which will also save you money over time and help you pay off the loan faster.
  • Making home renovations and improvements.
  • Staying in your home for a longer period of time will help your home increase in value, which will build up your home equity.

Get Assistance Increasing Your Home Equity

Building your home equity is one great way to help you improve your financial situation. If you are located in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, contact Foundation Mortgage today for a consultation.


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