If you are new to owning a home, you may be unfamiliar with certain terms, such as home equity. Home equity is essentially the part of your home that you already own. It is the percentage of your home’s value that you have already paid off. So, how do you build it without completely breaking the bank? And, how do you get it in the first place? This is something that many often struggle with, and we are here to help!
Your equity is a down payment, and you can work to build it by letting home appreciation take its’ course! This can be a short or long process, depending on how the market is during that specific time. The bigger your down payment, the larger your equity becomes.
If you want to build your equity fast, and you have the money to spend, you can think about adding additional payments on your mortgage. Try to make bi-weekly payments on your mortgage, versus just paying once a month. This will allow for a lower balance on what you owe overall!
Also, think about what loan term you agreed upon when signing your mortgage. Build equity quicker by cutting your loan term in half! Although this will allow for larger payments, you will pay it off sooner and thank yourself in the long run.
When it comes to home improvements, they definitely build equity, but only large home improvements like total renovations will make a dent. Large home improvements can include a total renovation and upgrade of a kitchen or bathroom, new flooring or all new appliances. The more your home is worth, the larger your equity can become.
Ultimately, you can build your equity by making larger and/or more recurring payments on your home and working to upgrade and modernize each room within your home!