If cared for properly and by making smart financial decisions, your home can become one of your greatest assets. You can build equity in your property, which will help you increase your wealth and improve your overall financial situation.
Home equity is essentially the value of the homeowner’s interest in the property. It is the current value of the house, minus all of the liens and other liabilities on the property. As you continue to pay off your home’s financing, you can build equity in the property. However, there are other ways to build this equity as well. Let’s take a look at a few additional ways to build equity in your home.
If You Are Going To Build Equity – Start Off Big!
If you want to get a head start with your equity, you must start at the home-buying process. The larger the down payment that you provide, the easier it will be to build equity in your home. When first purchasing your property, strive to provide a full 20% down payment. This will not only help you build equity at a faster rate, but it will help to lower your monthly payment as well.
Make More Than One Monthly Payment
Another excellent way to build equity in your home is to make more than one monthly payment on your mortgage. This will help to pay off your mortgage at a faster rate and will reduce the amount of interest you will pay over the length of the loan. If you pay your mortgage once a month, strive to make two payments each month, even if the second payment isn’t very big.
If making an extra payment is too difficult, consider paying just a little extra to your loan’s principal when you make your monthly payment. You may also consider spending your birthday money, that bonus at work, etc., as an extra mortgage payment. While a little extra money doesn’t seem like much, it can quickly add up.
Choose Your Loan Terms Carefully
It is tempting to choose a 30-year loan as you will likely receive a low monthly payment. However, if you want to build equity, choose your loan terms carefully. Consider shorter term lengths such as 10 or 15 years as this will reduce the amount of interest you will pay on your loan and you will pay off your home significantly faster.
Additionally, don’t settle on a high-interest rate. When looking for a mortgage, shop around to find the lowest rate. Even a 0.5% difference in rate can mean a difference of several thousand dollars over the course of your loan. This will mean that more of your monthly payment will go towards the principal balance, rather than the accrued interest.
Focus On Home Improvement Projects That Increase Property Value
As you consider various home improvement projects around your house, choose those that will increase your property value. These projects will not only make your house more appealing to potential buyers when you are ready to sell, but it is a fast way to build equity as well. There are many projects such as installing a new, black front door that can increase your home’s value by up to $6,000.
Just be mindful as you choose your projects that they also offer a large return on your investment.
By being smart with your finances and your home, you will reap the rewards. At Locations North, we are ready to help you buy your dream property. We can help you find a home in your budget and that will help you build equity and improve your overall financial health. Contact one of our REALTORS® today and let’s get to work.
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