Things are extra tough for almost everyone these days and building equity in your home may not be on your priorities list. However, the fact is that for most people, now is the best time to build home equity. Why? Because if you can afford it, working on home improvement or paying more towards your mortgage is easier done now than when the norm was spending time and money outside the home.
Build Home Equity Now
Building home equity is an important part of being a homeowner. Each payment you make and any improvement you do for the home goes towards building home equity. No matter how small the growth is, small growth accumulates over time and can be useful later. Home equity is a financial asset that can be accessed in a variety of ways especially in times of need.
But first, what is home equity? Some people may not be aware that the value a homeowner owns in a home is what constitutes home equity. To have an idea regarding how much is your home equity, just take the estimated current market value of your home and subtract what you still owe in your mortgage from that. What’s left is your home equity. For example, if your home can be sold for $500,000 now and you still have $150,000 left to pay, then your home equity is around $350,000. That’s a huge asset that you can access via a home equity loan or when you sell your house.
What Are Ways to Build Home Equity Now?
The first step to building your home equity is to put in a substantial downpayment. The bigger the downpayment you put in when you buy your home, the bigger the initial home equity will be. After getting this head start, you can focus next on increasing property value. You can achieve this by making home improvements that boost the property’s value. This can include adding a deck, retiling some areas, modernizing the kitchen, and so on. A good way to know which home improvement projects can bring the most value is to consult real estate professionals. Note that what you spend on home improvement may not be equivalent to the increase in property value that you can enjoy later. Next is to make sure that you pay more on your mortgage. You can pay more by simply paying more than your fixed monthly obligation. You can also opt to change your payment schedule from monthly to bi-weekly to make things easier to manage for you. If you think that you can still do more, you can consider refinancing to a shorter loan term. This will substantially increase your minimum monthly payments but usually gives you a better exchange rate plus a shorter payment plan. Last but not the least, you can simply wait for the property value to rise. Most residential areas are continually developing so even without doing anything, you can expect to see an increase in property value after a few years.
Make Your Home Equity Work for You
One great thing about home equity is that it is like having a time deposit that you can access later or during times of need. If you need access to your home equity soon, you can tap into your home equity by applying for a home equity loan. Contact us if you need help with a home equity loan.