Culture

Travel

Milestones

Overview

Fraud

Financial Pathways

Take a new approach to managing credit, savings and making smarter financial choices with expert advice from Life and Money by Citi.

Money

Well-being

Credit Cards

Banking

Lending

Investing

Citigold®

Citi Financial Pathways

Around the world, Citi has strategic locations where our employees go to work each day to support our core businesses and drive solutions for our clients. 

Products and Services

NavBar

Home

FooterNav

<p>Building equity in your home is an investment in your financial future.</p>
<p>Equity is the portion of a home that you own outright. It's the difference between your home's current value and the amount owed on your mortgage.</p>
<p>Once you've built up enough equity, you can leverage it to help cover large expenses. For example, a HELOC home equity loan can be a cost-effective way to access funds &mdash; for, say, a home renovation &mdash; compared to using a credit card.</p>
<p>With that in mind, below are four tips to help you build up the equity in your home as soon as possible.</p>
<h2>Save up for a big down payment</h2>
<p>Believe it or not, you can start building equity before you even get the keys to your new home.</p>
<p>The down payment made when you close on a property determines the size of your mortgage. The larger the down payment the smaller your mortgage, and the greater the amount of equity you&rsquo;ll have access to.</p>
<p>&rdquo;Making a big down payment is smart, as long as it doesn&rsquo;t totally drain your savings,&rdquo; says Todd Huettner, president of Huettner Capital in Denver, CO. &ldquo;It&rsquo;s a balancing act between putting down as much as possible and making sure you still have enough funds to cover moving expenses and other unexpected costs.&rdquo;</p>
<p>Huettner recommends saving up money strategically. Create separate savings accounts for your down payment fund and an emergency fund, then contribute to both regularly.&nbsp;</p>
<p>Organizing the money in this way can help you be prepared for both the short term and the future.</p>
<blockquote>
<p>Create separate savings accounts for your down payment fund and an emergency fund, then contribute to both regularly.&nbsp;</p>
</blockquote>
<p><img class="right_image" src="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/GettyImages-125142280.jpg" alt="A contractor walks homeowners through plans for an addition."></p>
<h2>Make extra payments on your mortgage</h2>
<p>After you've moved in, one of the most efficient ways to build equity is to make additional payments on your mortgage. Extra payments will help decrease your loan balance faster and increase the amount of available equity.</p>
<p>"It doesn't have to be a lot of money," says Huettner. You can pay $20 or $50 extra every month, plus more whenever you experience a windfall. Even little additions will add up over time to make a difference."</p>
<p>Making additional payments generally works in the same way as the regular, monthly payments. You may need to specify that excess funds be applied to your principal loan balance. This will ensure that the money gets applied to the amount you owe on the home and won't be put toward other expenses.</p>
<h2>Invest in some home improvements</h2>
<p>Increasing a property's market value, particularly with home improvements, is another way to build equity.</p>
<p>It's important to note that home improvements are not the same as regular maintenance and upkeep. "When you want to add value, you have to do more than just replace the carpet," says Huettner. "Often, adding square footage is the best way to do it. After that, it's renovating kitchens and bathrooms."</p>
<p>Keep in mind that every renovation is different, so the amount of value you'll add to your home by renovating will differ. Automated valuation calculators can offer you a broad sense of what your home might be worth post-renovation, but the most accurate valuations will come from an appraiser.</p>
<p><img class="right_image" src="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/GettyImages-1299032518.jpg" alt="A couple construct a flowerbed on their property."></p>
<h2>Wait for your home to appreciate</h2>
<p>Although not the quickest option, you can also wait for your home to appreciate. Real estate values tend to rise over time and any increase in value leads to added equity. Of course, the increase in value and the amount of time that takes to appreciate is dependent on the housing market.</p>
<p>Nationally, the 2022 Core Logic S&amp;P Case-Shiller Home Price Index found that, when adjusted for inflation, houses that were worth $178,000 in January 1990 appreciated to become worth $328,000 in January 2024, on average.</p>
<p>"The longer you live in the home, the better chance you have of good appreciation, especially if you keep it well-maintained." says Huettner.</p>
<p>Whether you're saving up for a down payment or making additional payments on the home you own now, you're on your way to building up equity &mdash; and getting closer to reaching your financial goals.</p>

4 Ways to Increase Your Home Equity

<p>They keep their rainy-day funds funded. Their bring-lunch-to-work game couldn't be stronger. And retirement savings? Their IRAs deserve A+'s.</p>
<p>It's tempting to think of great savers as unicorns. And with good reason: A 2018 GOBankingRates survey found that 16% of Americans have $300,000 or more in retirement savings, while 42% have stashed away $10,000 or less.</p>
<p>What do people say holds them back from saving more? A 2018 Bankrate poll indicated that expenses, underpaying jobs and debt are among the most common challenges. Life gets in the way, too: Roughly one in six respondents reported that they simply haven't gotten around to saving.</p>
<p>Whatever your reason, know that it is possible to <a href="https://www.lifeandmoney.citi.com/lam/articles/money/family/personal-financial-planning-for-families" data-link-source="tiny">start saving</a> and make a dent in debt &mdash; just take it from other people who have adopted some smart money tactics and joined the ranks of super savers.</p>
<h2>The money coach</h2>
<p>Ashley Feinstein Gerstley began her career in investment banking but came to realize the field didn&rsquo;t suit her. &ldquo;I was making a lot of money, but working long hours,&rdquo; she explains. &ldquo;I was eating take-out food at my desk every night and leaving at 2 a.m.&rdquo; After getting her annual bonus, she decided to quit and make a lifestyle change.</p>
<p>Gerstley invested in workshops and classes to help find her next career, but also splurged on dinner and drinks with friends &mdash; a habit from her days as a high earner. &ldquo;I realized pretty quickly that my bonus was almost gone, and my lifestyle was unsustainable,&rdquo; she said. &ldquo;I had to figure out my money stuff.&rdquo;</p>
<p>Through a certification with the International Coach Federation, Gerstley became a money coach. In her newfound role she not only helps clients get more organized with savings and investments, but also guides them over any psychological hurdles they encounter along the journey. Here are the top financial tips Gerstley shares with clients (and takes note of herself):</p>
<h3>1. Talk about money</h3>
<p>&ldquo;People think everyone is doing better than them,&rdquo; Gerstley says. That mindset may make you hesitant to talk or seek help with your own financial problems, and, by extension, vulnerable to unintended peer pressure to spend more money. &ldquo;Like when you&rsquo;re at dinner and there&rsquo;s pressure to have another round of drinks &mdash; another round of $17 cocktails. It&rsquo;s not [your friends&rsquo;] fault, they just don&rsquo;t know that you are trying not to spend so much money.&rdquo;</p>
<p>Share your money story &mdash; in terms you&rsquo;re comfortable with. Decline that pricey cocktail, and simply explain that you're working toward a goal &mdash; like paying off student loans or buying a car &mdash; and would rather that $17 go into a savings account.</p>
<p>Gerstley says when you speak up about your own financial concerns, you may see your friends follow suit. From there, plan less expensive gatherings, like potluck dinners and game nights. Then sock away the money you save.</p>
<blockquote>
<p>Share your money story &mdash; in terms you&rsquo;re comfortable with.</p>
</blockquote>
<p><img class="right_image" src="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/web_GettyImages-1040303974.jpg" alt="woman taking notes as she refers to her mobile device"></p>
<h3>2. Make a money journal</h3>
<p>In Gertsley's book, The 30-Day Money Cleanse, she suggests <a href="https://www.lifeandmoney.citi.com/lam/articles/money/productivity/bullet-journal-financial-planning" data-link-source="tiny">documenting every penny you spend</a> and how it makes you feel in a journal. This can help you identify the things you really care about spending money on and expenses you can cut.</p>
<p>"Like a food cleanse, if you quit dairy and sugar and coffee, you might realize that you don't miss them." Gerstley informs. This all leads up to Gerstley's main lesson: Change your money mindset. "Successful money cleansers always experience this shift where personal finance is not 'a have to,' they realize it is a gift and an act of self-love," Gerstley says.</p>
<h3>3. Put savings out of sight</h3>
<p>Many people have linked checking and savings accounts. It's convenient, allowing you to access your savings balance by transferring funds to checking. But some may find it helpful, in the spirit of better savings habits, to create at least one <a href="https://www.lifeandmoney.citi.com/lam/articles/money/managing-money/money-market-account-or-cd-account" data-link-source="tiny">savings account</a> that is not connected to your checking account, Gerstley suggests.</p>
<p>You can still set up deposits to it through your checking account or deposit straight into it each month like any savings account &mdash; but making it separate can click something in the brain so it doesn't seem as accessible. Consider assigning this "lock box" a purpose &mdash; to cover emergencies or a home down payment.</p>
<p>Likewise, Gerstley says, "View the money in a 401(k) or IRA accounts as untouchable until you retire." They're not intended to fund a car purchase or a wedding.</p>
<h3>4. Don't delay</h3>
<p>Many people, believing that a bigger paycheck &mdash; and therefore a more forgiving budget &mdash; is always on the horizon, and put off saving till they get older. Gerstley flags this thinking as a huge problem. If you happen to lose your job or face medical issues, savings will be a crucial cushion. The time to start saving was yesterday.</p>
<h2>The frugal lawyer</h2>
<p>Holly Carroll worked as an associate lawyer at a New York law firm in her late twenties and early thirties. The money was amazing, she says, but the hours were brutal. &ldquo;I knew I couldn&rsquo;t keep it up,&rdquo; Carroll says. &ldquo;I just decided to pay off my school loans and sock away as much as I could.&rdquo; So while her fellow associates lived in doorman buildings and dined out at five-star restaurants, Carroll developed frugal habits and shared a modest two-bedroom in Brooklyn. She still went out for drinks with friends and made the occasional splurge, but she developed some smart strategies around limiting her spending.</p>
<p>When she quit, she and her husband decided to move back to her hometown of Pittsburgh, PA, where their income went much further than it did in New York. They found a&nbsp;<a href="../../index.htm" target="_blank" rel="noopener" data-link-source="tiny">three-bedroom home in her dream neighborhood</a>&nbsp;&mdash; and she had saved up enough money to pay for it in cash. Carroll is now a stay-at-home mom and avid crafter. Her top advice:</p>
<h3>1. Don&rsquo;t overspend on work attire</h3>
<p>&ldquo;When I first started at my [attorney] job, there was another associate I worked with who always looked sharp; [she] wore the same suit a few days a week and rarely wore designer heels,&rdquo; Carroll says. They were chatting one day, and her colleague explained her work dress policy: She considered money spent on work clothes as cutting directly into her salary.</p>
<p>That idea was like a light bulb moment for Carroll. She had always been a simple dresser, so she developed a strategy of sticking with a set color palette so that she could easily coordinate all of her work pieces into multiple outfits &mdash; it often seemed she had a larger wardrobe than she did.</p>
<h3>2. Set a weekly cash allowance</h3>
<p>&ldquo;I set a budget for weekly walking-around money and take out that amount in cash,&rdquo; she says, "then I try to only spend that much.&rdquo; Physically seeing how much money she has to spend usually keeps her from making impulse purchases or going shopping on a lunch break.</p>
<blockquote>
<p>Set a budget for weekly walking-around money and take out that amount in cash.</p>
</blockquote>
<p><img class="right_image" src="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/web_GettyImages-857304948.jpg" alt="two women cooking"></p>
<h2>The young saver</h2>
<p>When Haley Evans graduated from college and moved to Dallas, TX, she had very little student debt and earned a healthy paycheck. "But I spent it all on Dallas nightlife," Evans says. By age 24, she says, "I was kind of trapped in this cycle" &mdash; unfulfilled in her job, and compensating through happy hour, brunch and shopping. Evans was taking advantage of all that Dallas had to offer, but that lifestyle quickly went beyond her financial limits.</p>
<p>Now, five years on, Evans has remade herself as the model of a buckled-down saver. Her husband's pay covers daily expenses, and she puts her income toward business school and savings &mdash; both investments in her future. Here is her top advice:</p>
<h3>1. Create frugal joys</h3>
<p>A profound moment helped end her cycle of wasteful spending. "One night I was out drinking and just realized I wasn't getting any joy out of it," she says. "I felt like I wasn't really getting to have deep talks with friends since it was always so loud and it just didn't seem worth it anymore."</p>
<p>The next time a friend suggested a big night out, she countered with a nice long walk and home-cooked dinner. "I got to have real one-on-one time with her," Evans explained. "I call it finding frugal joys." Five years later, she and her friend are still doing those walks and joined a discount wine club to enhance those dinners.</p>
<h3>2. Get more out of your bank accounts</h3>
<p>One concrete piece of advice Evans offered: Find checking and savings accounts that offer high-interest rates. Evans and her husband did a lot of research to discover a savings account that offered much higher interest rates on their balance. "We put our wedding fund in there and the down payment for a house," she says. "It's awesome to see that [additional] money each month."</p>
<h3>3. Find healthy splurges</h3>
<p>"There was a period of time after [my] money cleanse where I was crazy thrifty because I am so competitive," Evans says. "But when you go too extreme, you feel deprived and then you binge." So, she figured out what regular splurges would bring her the most rewards. The top one was her gym. "I pay $105 a month &mdash; which is a lot for a gym here &mdash; but it brings me so much joy. It's community and women-based, and I go at least three to four times a week."</p>

The Secret Habits of Super Savers

<p>Interest rates may still be considered high, but you can still find plenty of opportunity in the current real estate market, especially if you&rsquo;ve prepped your finances first. Typically, this includes improving your credit score, paying down debts and bolstering savings. It may seem like a tall order, but it's worthwhile because underwriters consider each of these components when reviewing your loan application. Putting forth the strongest financial package possible will increase your chances of getting approved for a home loan and can also help secure the best possible interest rate, which can save you money over the life of the loan.</p>
<p>To help you get your finances in shape and navigate the current market conditions, we asked industry pros for their best advice on becoming a more competitive buyer.</p>
<p><img class="right_image" src="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/LAM_CompetitiveHomebuyer_BodyImage_1000x667_B_1.jpg" alt="A couple signs a document with a real estate agent"></p>
<h2>Work on your credit score</h2>
<p>The surest way to improve a credit score is to make payments on time and <a href="https://www.lifeandmoney.citi.com/lam/articles/money/managing-money/how-to-pay-off-debt" data-link-source="tiny">pay down debt</a> as much as possible. This process takes time, and while there's no immediate way to boost your score, you can try to expedite the process by checking your credit reports for any errors that can be resolved. You may also want to consider asking a friend or family member with good credit if you can become an authorized user on one of their cards. Doing so may raise your available credit and drop your utilization ratio, which is a major factor in determining your overall credit score.</p>
<h2>Build up savings</h2>
<p>You'll need accessible funds for a down payment and closing costs, but having reserves (your cash assets left over after covering those expenses) is important too; typically, lenders expect buyers to have three to six months' worth of mortgage payments in the bank for reserves after closing.</p>
<h2>Consider your debt-to-income ratio (DTI)</h2>
<p>This is a measure of your total recurring debt divided by your gross monthly income. A good goal is for this ratio to be below 45% because that is the number most lenders look for when reviewing loan applications. If your current ratio is over that benchmark, you can improve it by either paying down debt or increasing your monthly take-home pay.</p>
<p>Your best bet is to connect with a home lending officer three to six months before you're ready to buy, says Zachary Rose, a Citi home lending officer in Laguna Niguel, CA. That way, "you can start having a conversation with them about your down payment, FICO score, DTI, and reserves &mdash; all the small details that can throw a wrench in the approval process," he says, instead of having to scramble.</p>
<h2>Get pre-approved for a mortgage</h2>
<p>Getting <a href="https://www.lifeandmoney.citi.com/lam/articles/milestones/home-buying/how-to-get-a-mortgage-pre-approval" data-link-source="tiny">pre-approved for a mortgage</a> is always beneficial because it provides proof that you can afford to buy the seller's property, assuring them your offer is legitimate. It's a must particularly in competitive markets because if you're not pre-approved, other buyers who can provide this reassurance can swoop in and win out. In fact, "a lot of listing agents won't even look at an offer unless it comes with a pre-approval attached," says Rose.</p>
<p>Keep in mind: Most pre-approvals don't come with a lending commitment; they give a rough estimate of what the buyer can afford. Because the final lending decision comes later, after further review, this type of pre-approval can be riskier for both the buyer and seller because the loan application could eventually be denied.</p>
<p>If you're looking for added security, consider an option like the Citi SureStart&reg; Pre-Approval program, which offers a firm loan commitment for approved borrowers. This makes your offer stronger "because you've taken the main hurdle out of the process," says Rose.</p>
<p><img class="right_image" src="https://www.lifeandmoney.citi.com/rcs/lifeandmoney/storage/public/LAM_CompetitiveHomebuyer_BodyImage_1000x667_A_0.jpg" alt="A real estate agent shows an apartment to a couple"></p>
<h2>Work with an experienced local agent</h2>
<p>The pro you choose can directly impact your home buying success, especially in a fluctuating market, so you'll want to find a knowledgeable agent who is responsive and available to answer your questions and is a proven negotiator. Because it's less of a seller's market right now, says Rose, "hiring someone who has the skills to negotiate on price and concessions can be a really big advantage in this environment."</p>
<p>Research options online and ask friends and family for their recommendations, with an emphasis on finding an agent familiar with your area. "Real estate markets are very local, so what's happening nationally may or may not apply," says Stanley D. Longhofer, Ph.D., director of the WSU Center for Real Estate at Wichita State University in Kansas.</p>
<p>"An agent who can help you understand what's going on in your local market is essential," he says. "I can't emphasize the value of that enough. They've seen the types of offers sellers are receiving and they know what types of terms you may need to put to create a competitive offer."</p>
<h2>Structure a strong offer</h2>
<p>The amount of your offer is important, of course, but there are also other components you can include to make your bid even more attractive to the seller. To start, you can increase the amount you put in escrow, or your good faith deposit on the home. The typical escrow amount is 3% of the home's purchase price, according to NAR, but upping that percentage can show the seller you are serious about buying, says Dr. Longhofer. "Just be sure this is an amount you can afford to lose because, ultimately, if you decide to break the contract and walk away from the home, there's a chance you won't get this money back," he says.</p>
<p>If you can afford it, consider covering the closing costs or absorbing repair costs, if any, too. While you won't want to waive an inspection entirely &mdash; it's the only way to get a true picture of the home's condition and the opportunity to walk away if it needs too much work &mdash; agreeing to pay a set dollar amount toward repairs can sweeten the deal, Dr. Longhofer says.</p>
<p>Finally, if you're not set on a particular time frame, consider accommodating the seller's requests on the closing and possession dates. Details like these can be the concessions that give you the winning edge.</p>

How to Be a More Competitive Homebuyer Right Now

Boiler Plate 1

L&M Article Template

header