Equity is the difference between your home’s value and the amount you still owe on the property. Equity can be an extremely powerful tool and also help provide you with enough money to help with future investments or even use as cash down for your next home. How does one obtain equity? Generally speaking, the longer you have a home and pay down the mortgage, the value of the home goes up over time thus increasing your home’s equity. But there are other ways to increase your home’s value, rather than waiting for it to appreciate on its own. Here are a few tips for building equity on your house.
This is by far, is the fastest way to build equity in your home. Many people don’t realize that by making only one extra mortgage payment a year can potentially help pay off your home 7-8 years ahead of schedule. Now imagine if you could make an extra two payments per year! Some people take their monthly mortgage payment, divide it by 12 (months), then add that difference to their monthly mortgage payment. This may sound like an extra expense, but by moving their money around and using other sources like a tax return, or by taking a vacation every other year instead of annually, you can also use those funds to put towards an extra principal payment, which can save you even more in the end!
Make simple home improvements around your home and watch your equity grow! The most common home improvement projects that add value to your home include redoing your kitchen, bathrooms, or replacing an old garage door. Think “curb appeal” too! Replacing a front door, along with new shrubs, bright flowers, and landscaping can bring you a return of up to 3 times more than what was invested to make the changes!
Most people end up getting a 30-year loan, thinking that it is the most affordable option but depending on today’s rates, that’s not always the case. Ask your lender to run numbers on a 15-year loan, and you might be surprised. If it’s manageable, you might find that paying off your mortgage in half the time is a lot more appealing, therefore helping you build equity faster on your house.
This may seem like it wouldn’t make a huge difference, but in fact, it does. The phrase “cash is king” still applies here and by paying the standard 20% down, you are immediately building equity from the start, and you can potentially even qualify for a lower interest rate, saving you hundreds, or even thousands on your loan! There are several ways to come up with the extra cash needed including a cash-in refinance program, but this is something you should discuss with your lender and see what programs they currently have on offer.
Building equity is one of the primary financial benefits of homeownership, and these are but a few tips for building equity on your home. If you have additional questions about building equity, make sure to contact us at firstname.lastname@example.org or call 702-255-1145.