Building your home’s equity as early as you are able can be of great advantage for you in the future. This is true though a lot of people don’t really know what equity is and how to build it.
Equity is the value of your home that you own. It is the difference between the property’s market value and the money still owed. Once equity is built, it can serve as a possible cash cushion should a need arise in the future or could be used to get fast cash when investing in another property.
Home equity is typically built up over a period of years as the homeowner continues to make payments on the property. However, do you know that building your home’s equity doesn’t have to take years or even decades? We’ll be sharing with you our top 4 tips to building home equity fast and easy!
#1 Go For A Larger Down Payment
It is tempting to buy a property and just pay a low down payment because you were given the chance to do so. That is okay but consider that doing that will also mean taking longer to pay for the home in question. Try putting in as much down payment as you can afford. This way, you’ll be off to a great start!
#2 Appreciate At A Faster Rate By Paying More Monthly
By paying more towards your principal, not only will you end up fully owning your home faster, but you’ll also be setting yourself to building your equity. Do you know that by paying an extra month’s worth towards your principal each year you’re potentially shaving off more than 5 years from your loan’s schedule? Sure another month’s worth of payment might not be easy on the pocket but a few hundred dollars extra payment per month would have the same effect while being easy to do for you.
#3 Go For A 15-Year Mortgage Plan
Most people automatically get a 30-year mortgage plan because they think that a 15-year one will mean having to come up with twice the ‘usual’ for payments each month. The truth is that the difference may not be as big as you think so better ask your mortgage lender to compare the needed monthly payments for both a 15-year loan and a 30-year one. This way, you will be better informed to make the right decision.
The above is true because the longer you take to pay for a loan, the more the initial value is inflated by the interest rate. A longer term means you end up paying more for interest as the years add up. More so, the difference of the monthly payments between the 15-year mortgage and the 30-year mortgage might be as little as a couple of hundred dollars. Imagine the savings in both money and time when you’re able to pay for your home faster.
#4 Be Smart About Home Improvement Projects
The right home improvement projects add a lot of value to your real estate. A few thousands worth of upgrades can increase your home’s value by $20,000 to $50,000 more so if you choose to go for a kitchen upgrade or adding another room to the house. Landscaping is a huge value-booster too, with possibilities of adding 4x the value of what you spend. By increasing your home’s market value, you’ll be increasing your equity as well.