How can homeowners build equity in their property?

Homeowners can build equity in their property through two primary methods: increasing the home's value and paying down the mortgage.

Increasing the home's value can be achieved through various means such as making renovations, enhancing curb appeal, or improving the overall condition of the property. As the property's market value rises, so does the homeowner's equity—this is the difference between the market value of the home and the outstanding mortgage balance.

On the other hand, paying down the mortgage directly increases equity as it reduces the amount owed on the loan. With each mortgage payment that goes toward the principal, the amount of equity in the home grows. Therefore, both factors—appreciation of the property’s value and reduction of the mortgage balance—contribute together to the overall equity a homeowner has built in their property.

Renovating the property can lead to an increase in value, which is why it aligns with increasing the home's value but does not address the mortgage aspect, making it a less comprehensive option. Thus, the best approach to building equity encompasses both increasing the home's value and paying down the mortgage.