Equity is essentially how much of your home you actually own. That includes your down payment and all of your principal payments. You can think of like this: Your Home’s Value – Your Mortgage = Your Equity. Building your equity is important because it gives you more leeway in structuring your mortgage/debt and is key to long term wealth. Here are a few quick ways to increase your home’s equity!
Lower Your Mortgage Debt
If you don’t have a loan yet, you can put yourself in a good position by having a large down payment. You’ll immediately have more equity from the beginning, and if you can put enough down, you may not have to get mortgage insurance. We can help you analyze your financial situation to determine the right down payment for you. In some cases, putting down less can actually save you money.
Refinance to a Shorter Term
If you can afford it, moving to a shorter term can provide a large increase in equity. This happens because short term loans such as a 15-year mortgage usually have lower rates, but larger principle payments. Essentially, you’re paying more every month, but a larger portion of that money is going directly towards paying off your loan. Therefore, you increase your equity faster.
Raise Your Home’s Value
Home renovations may seem costly, but you recoup some of that investment if you eventually sell your home, and it adds immediate value to your property. According to Bankrate, some of the best renovations to increase your home’s worth are things like manufactured stone veneer, garage door replacements, minor kitchen remodels, and siding replacements.
Or, if you’re not in a hurry, simply wait. You’ll gain equity over time and at your own pace. Additionally, the market is constantly shifting, including home values, meaning that a swing in the market may increase your value. Alternately, the market can swing the other way, and you may have less equity at some points. Let’s talk about your goals and how we can help you meet them, by leveraging your equity and debt! Contact us today!