Building equity in your home can provide you with a valuable resource. It can be used to help you obtain credit in a financial emergency or it can make it easier to sell your home. However, many people aren’t aware that there are multiple ways to build equity in their homes. By making use of several methods, you may be able to build more equity in a shorter period of time.
Hope for a Market Boost
Depending on your neighborhood, this may actually be easier than you think. If the market improves in your area, the value of your home will automatically rise and you’ll establish more equity in the property. Of course, the opposite is equally true. A drop in the market means your home will be worth less and you’ll actually lose equity in your home.
Increase the Home’s Value
Making home improvements to your property can also help maximize the value of the property, which also boosts the equity in your home. However, you should be aware that not all improvements boost market value. Some ideas that will help include updating the kitchen and bathrooms. It’s also a good idea to pay attention to the home’s curb appeal, which includes landscaping improvements, adding or improving a deck, and painting the trim around the exterior of the house.
Reduce What You Owe
Equity is the amount of the home you own versus what you still owe to your lender. By paying off more on your mortgage, you’ll build equity in the home, meaning you own more of it. If possible, try to make double payments one or two months out of the year to help you boost your home’s equity.
Avoid Refinancing the Home
A second mortgage is a double-edged sword in terms of building equity. Yes, it does help you get a lower interest rate and that will pay off in the long run. On the downside, you’re starting over each time you refinance and your early mortgage payments will just be paying off interest. Refinancing throws away any equity you have already earned.
Select a Shorter Mortgage Term
If possible, try to get a 15-year mortgage instead of a 30-year loan. Every payment will be significantly higher, but the bonus is that you’ll earn equity twice as fast. You’ll also pay off the mortgage in half the time, which can be an added bonus.
Building equity in your home is important, but it’s up to you to determine how fast you want to build it. This can require tightening your belt, so you can invest more in the home’s equity, either by boosting its value or lowering your debt. It may not be easy, but you’ll be glad you did it when a financial emergency does strike.