As a homeowner, building equity in your home is one of the best ways to open doors to opportunities in the future. Your home equity can, for example, be used to pay college tuition for one of the kids, build your retirement savings or free you up to buy the vacation home of your dreams. Equity can also help you remodel your current home — imagine at last having that chef’s kitchen you’ve always dreamed of or a three-season porch.
Thinking of the many ways you could leverage the equity in your home is easy. Building equity is a bit harder. But there are some proven tricks that can help speed the process. Here are some effective steps to build equity in your home.
Proven tricks for building equity in your home
Amp up your down payment.
If you want to build as much equity as possible in the shortest amount of time, making a big down payment can make a huge difference. As a bonus, if you pay more than 20% down, you can avoid paying private mortgage insurance.
Pay your mortgage…and maybe a little extra.
Home equity is the amount of your home that you own, which includes the amount of your down payment and the amount which you’ve paid down on your mortgage. Keep in mind, your entire mortgage payment goes to several sources, including interest and principal, so typically only a fraction of your monthly payment goes toward building equity. Depending on your agreement with your lender, you may be able to make an additional payment toward your principal…even a little extra every month adds up and can build equity.
Increase your home’s value.
Sometimes, a property value increases due to market changes — requiring little action on your part but to ride the wave. But you can also take matters into your own hands and renovate your home. Home improvement can add value to your property, and that increases your equity. Be aware that home improvements done poorly or market flux can also both lead to decreases in your property value.
Refinance your mortgage.
Mortgage rates are always changing, so if you see rates trending downward, it may signal an opportunity for you to lower your interest rate on your mortgage by refinancing. In addition, you may be able to refinance to a shorter-term loan, which can save a load of cash in interest. You’ll pay off your loan faster and build equity faster as well. Resist the urge to cash out some of your equity, which will work against your goal to build equity.
Build equity in your home faster with these tipsBuilding equity in your home is a great way to set aside cash for anticipated future needs (or wants), whether it’s retirement, your daughter’s medical school tuition or your spouse’s dream of a week in Positano, Italy. Use these tips to build equity in your home faster and you’ll see those dreams come true in no time.