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Mortgage Dictionary -> Appreciation

As a homeowner, there are many things you hope for. Some of these might include paying off your mortgage ahead of time, being able to afford necessary improvements for the house and taxes that decrease rather than increase. But homeowners most want to see the value of their home go up. If you're not sure what appreciation is, or how it occurs, as well as what it means to you, you'll want to read on.

What is Appreciation?

Appreciation is the increase of the value of a piece of property overtime. This can be homes and, far less often, automobiles and other pieces of personal property. There are many factors that can cause this, as you'll learn about a bit later on. So how does it work? Let's say you buy a home priced at $125,000. After a few years, you have the house appraised and find out that it is now valued at $150,000. That means your house has appreciated to the tune of $25,000, which is a nice chunk of change.

When Does Appreciation Occur?

There are many factors that can lead to a piece of property appreciating. Among these are increases in the demand for the property, decreases in the supply of the property, and improvements to the property. So if you live in a city where it's tough to get a house similar to yours, you can pretty much bet on the house value appreciating. If you're making improvements to the property, you'll have a pretty good chance of appreciation occurring; however, it's not guaranteed, particularly if you live in an area with a weak economy.

What Does It Mean to You?

Appreciation is actually a pretty important thing for homeowners, for the sheer fact that it is a sign of the value of the property going up. This means that if/when you go to sell the property, you'll get more for it than what you paid.