Building enough home equity is vital, whether you’re a seasoned or first time home buyer. It is basically your financial stake in your home, and because it’s an asset, you could use it for home renovations, funding your children’s college tuition, financing your retirement fund, or even purchasing another house. If you are in the dark about building equity, read these practical ways that can help you get started.
Put Down a Larger Down Payment
Put simply, your home equity is the amount of your house that you already own. If you’re looking to increase it just a short amount of time, consider making a bigger down payment. In general, industry standards recommend that homebuyers put at least 20% down if they’re using conventional loans for funding a home purchase and don’t want to pay PMI or private mortgage insurance. Basically, if you can put down a bigger amount, say 22% for instance, you can build your equity much faster. Just make sure to crunch the numbers first and determine that doing so won’t negatively impact your other financial goals.
Pay Off Your Mortgage on Time
Since your home equity is essentially your home’s down payment and how much you’ve already paid towards your home loan, you can build it simply by paying off your mortgage on time every month, as suggested by primeres.com. If your home’s purchase price is $325,000 and you put down 20% down payment, you already have $65,000 stake in your home. Your home equity will increase as you repay your loan over time.
Consider Paying More Monthly
For instance, rather than paying the usual $1,000 on your mortgage every month, consider paying more. These extra payments will pay off your loan faster, increase equity more quickly, and save you more money in interest that you can then use to fund your retirement, remodeling your house, etc.
Wait for the Value of Your Home to Rise
If you don’t really need to use your home equity right now, just wait for the value of your property to go up on its own. Experts indicate that this would happen naturally over time and as the real estate market adjusts, the prices of homes would also go up, in turn boosting your home equity.
Remodel Your House
Simply making small improvements to the interior of your house can help increase its overall value. Start with changing your lighting fixtures, repainting your bedroom or kitchen walls, and updating your bathroom. All these are simple changes that won’t require too much money.
Give Your Home’s Exterior Some TLC
Planting some new flowers, trimming the grass, repainting the exterior walls, and updating your windows can make a huge difference should the time you need to sell your house comes.
Lucky for you, there are many different ways to increase your home equity. This means that if it’s not possible for you to put down a sizeable down payment or pay off your home loan early, you could make wallet-friendly and simple changes to your home. As your equity increases, you will be able to use it to realize your other financial goals.