Tips to increase the equity in your home
One of the most commonly cited reasons to buy a home versus renting is to build equity. Equity is the difference between the market value of a home and the amount left of the mortgage. While equity naturally increases with each payment a homeowner makes, there are a number of benefits to increasing the equity in a home. The following are five ways to increase the equity in your home.
Make a large down payment
If you are preparing to purchase a home, making a large down payment is the fastest – and easiest – way to build instant equity. In addition to building equity, making a large down payment can help reduce monthly mortgage costs or eliminate the need for costly mortgage insurance.
Prioritize paying off the mortgage
Homeowners build equity every month simply by making their mortgage payments. Paying off the home faster, even if it’s by paying just a little extra each month, can build equity over time. Common tactics for paying off the mortgage even faster include putting any money from tax returns or other financial windfalls directly towards the mortgage, making an extra payment one to two times per year, refinancing to a loan with shorter terms, or increasing the monthly payment amount by a few hundred dollars.
Before putting extra money towards the mortgage, however, ensure it’s going towards the principal – not the interest. In addition to building equity and helping pay off the mortgage faster, making extra payments can help homeowners save thousands in interest.
Make improvements inside
Whether it is installing a new light fixture in the kitchen or entirely gutting and rebuilding a bathroom, home improvement projects help increase equity. Look for projects that have a high return on investment; this ensures that homeowners can maximize the equity they are getting without blowing the budget. Projects around the home with a high return on investment include minor kitchen remodels, new flooring, or updating bathroom fixtures.
Add curb appeal to exteriors
Curb appeal is important; it’s the first impression people get of a home. Because of this, increasing curb appeal can help increase a home’s value – and add equity. Common exterior projects that can build equity quickly include building a deck, installing new vinyl siding or stone veneer, updating landscaping, or adding shutters.
Follow market trends
Patience is a virtue – and is especially important when waiting for the equity in a home to increase. The value of most homes naturally increases over time; the equity in a home will likely increase over time as the home appreciates in value. Unfortunately, the opposite can be true – if the market trends downward, you may lose equity as well.
by Author, October. 05, 2019