Homeownership brings about so much but one item that is built into the package is a savings account and possible equity if you do the right things. Home equity is the difference between your home’s market value and the amount that you owe on a mortgage. Five ways to help increase the amount of equity you have are as follows:
1. Make a large downpayment when you purchase your home. Putting a larger downpayment down from the very beginning starts you out with a larger amount of equity right from the beginning. Putting 20% or more down can also help you avoid pricey mortgage insurance so can alternatively help with monthly payment for further saving or additional payments down the road.
2. Cut the term of your loan in half. Taking out a 15 year mortgage vs the traditional 30 year mortgage can help you pay down the principal balance quicker and you will build equity twice as fast. Taking out a 15 year mortgage also usually decreases your interest rate which also helps with savings. You’re payments will be higher but if switching to a 15 year mortgage is a possibility for you, it definitely helps build up the equity.
3. Pay More on Your Mortgage. You can do this in several ways but many people choose bi-weekly payments to help make an additional payment every year, which in turn pays your mortgage down or you can also just make an additional payment on the principle of your mortgage when you have available funds. Paying off a little extra each year can help increase the equity.
4. Make Smart Improvements To The House. Some home improvements and remodeling projects can help build equity into your home. The average payback of home improvements is 64 cents to the dollar so if your home needs some upgrades that you want yourself while you live there, you may end up earning some of that money back if you sell.
5. Let Your Home Value Appreciate. Building equity through appreciation can depend on the current market. This process could take a little time or a lot of time. Continuing to be aware of what is going on in the real estate market around you, weather or not you are planning on selling anytime soon, can help gauge the amount of market equity you have growing in your home.
Contact us today to help with additional advise on how to build equity in your home and how we can help get the most equity out when you sell!