As a homeowner, you enjoy a number of perks. This includes the ability to build equity and wealth.
Equity is simply the home’s fair market value subtracted by how much is owed on the home. In today’s market, many homeowners are enjoying a surge in their equity as prices rise.
Did you know there are other ways to move the needle on your home’s equity? Read on to learn five strategies that can boost your return on investment.
Start with down payment
The easiest way to guarantee equity is to take on a smaller loan.
A large down payment will accomplish just that. Borrowers who submit a 20% down payment, for instance, will take on a smaller loan. Their ownership stake counts toward equity.
There are other positives.
With 20% down, borrowers can pay more toward the principal because they will not need to worry about mortgage insurance.
Homebuyers should assess their financial outlook and decide whether they want to allocate a large sum of money for the down payment.
Go above and beyond
Each month, your lender will expect payment for the monthly mortgage bill as stated. But that doesn’t prevent you from paying more.
A quick way to build home equity is to make bigger payments each month or send an extra payment each year.
Not only will you pay off your loan more quickly and earn equity faster, you’ll also realize additional savings through reduced interest costs.
Invest in home improvement
Homeowners do not need to wait to chip away at their loan to earn equity. They can also boost their home’s value with a renovation or some other form of home improvement.
Whether it’s a made-for-TV project or a smaller update, any improvement can help increase the overall value.
A refinance can accomplish several goals. But if you want to accelerate your repayment, a refinance can also shorten the loan’s terms.
By switching to a 15-year loan plan, homeowners can substantially speed up their repayment and reach 100% equity sooner rather than later.
The tradeoff, of course, is that you’ll have to pay quite a bit more each month.
In today’s market, it won’t take long to earn equity as prices continue to skyrocket.
At the same time, patience will go a long way toward earning the equity you deserve. Building equity is a long game that can really pay off.
So, if you’re not in a huge rush to earn equity, remember that the passage of time is another way to get there.