Definition of "Equity Appreciation "

Lydia Spink real estate agent

Written by

Lydia Spinkelite badge icon

United County Talking Rock Realty

The American Dream has cemented the role of homeownership into the collective conscience of the US population. Homeownership provides a place for families to stay that is their own, as well as the means to build equity. Before we get into analyzing what equity appreciation is, let’s first understand what equity is.

Equity or home equity is the difference between your home’s worth and the value you own on your mortgage. For example, a house bought for $300,000 with a $30,000 down payment, leaving $270,000 in the loan amount. To determine your home equity, you have to subtract the outstanding balance from the price paid for the home. When you buy the home, your equity is $30,000, and this grows with each mortgage payment. When you pay off your whole mortgage, your equity is 100%.

What is Equity Appreciation?

Equity appreciation results from home equity that increases due to appreciation. This is one of the two ways through which anyone can build their equity. The first method is mentioned above, by paying off your mortgage, but the second one deals with the market value of your home.

It is highly unlikely that your home value will remain the same after you purchase it. This value can go up and down, but the national average when it comes to property appreciation is 3%. Because of this, once you purchase a home, if it’s well maintained and prices in the neighborhood are appreciating, your home equity will also appreciate. Meaning that while your home equity grows from $30,000 with every monthly mortgage payment, it can also grow because of home appreciation. So, based on the example above, a $300,000 home that appreciates by 3% annually will have an increased home value of $403,000 (rounded up) in ten years.

Through equity appreciation, you can reach financial stability. However, there is no way to ensure your home equity will appreciate, but a market analysis can help as some areas appreciate faster than others. Economic conditions can also lead to property depreciation, but if you don’t maintain your home, this can also be a result.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Real Estate Terms

City apartment building that is overcrowded, poorly constructed or maintained, and generally part of a slum. In law, a tenement also refers to possessions of an individual that are ...

Business that transforms an underdeveloped tract of land into plots ready for construction. ...

Unimproved property. It has no utilities, sewers, streets, or structures and usually must be cleared. ...

Wood sheeting made from gluing together at lest three layers of veneer. The grain is placed at right angles with each adjoining layer's providing additional strength. ...

Commissions received by a syndicator when real property is sold. The fees typically occur after the investors receive their initial investment plus the specified return. ...

Wood strip (molding) at the bottom of a baseboard. ...

A will where the decedent's nomination of an executor/executrix is flawed, requiring an administrator to be appointed by the court and annexed to the will. ...

Allocating common or central costs to each unit of property. An example is assigning to each owner of an apartment based on the number of rooms occupied the cost incurred by the landlord to ...

Latin term meaning let the buyer beware. The buyer purchases at his or her risk, in the absence of fraud. This does not obligate the seller to volunteer information. However, legal statutes ...

Popular Real Estate Questions