Equity is one of those things that many homeowners are eager to build. Unfortunately, it’s not something that can be done overnight, and for most homeowners, it takes years and the right market conditions to truly built up a “good” amount of equity. In a nutshell, your home equity is simply a surplus in the value of your home compared to the amount you owe. For example, if your home is worth $500,000, but you only owe $350,000 on your mortgage, then you automatically have $150,000 worth of home equity.
How Can You Build up More Equity?
There are a few different ways you can try to boost your equity as a homeowner. The simplest is my making extra mortgage payments. This seems daunting, however, it’s a lot easier, and even more affordable than you might think! There are 3 main ways that even those on a tight budget might be able to pay off their mortgage quickly:
Rounding Your Mortgage: Simply round up your mortgage to whatever amount fits within your budget. This could be just a few dollars, or in the hundreds, either way, by rounding your mortgage up, you’re not only paying the loan off faster, but saving on your interest over the years.- Bi-Weekly Mortgage Payments: If you make bi-weekly mortgage payments (splitting your monthly mortgage into two equal parts) then by the end of the year you will have made an extra mortgage payment without even realizing it! Try to “half” your mortgage and set up bi-weekly payments to have an extra full monthly payment made each year.
- Paying Extra Principal: Your principal balance is the balance you owe on your mortgage without calculating in the interest of your loan. Making additional principal payments throughout the year can end up saving you thousands of dollars in interest over the course of your loan in addition to lowering your principal balance, thus boosting your home equity.
What if You Don’t Want to Make Extra Payments?
While making extra payment on your loan is the “go-to” way to pay down your loan, that doesn’t mean it’s the only way! There are multiple other ways you can help boost your home’s equity. Ensuring your home’s maintenance is always up to date ensures that your home is always in proper working order, protecting your equity while maintaining your homes interior, exterior, and overall condition. Big ticket items that are left unattended or damaged can significantly drop your equity so make sure to have things such as your roof, HVAC, electrical and plumbing inspected and maintained regularly.
Homer renovations are another great way to boost equity, however you have to make sure to weigh the cost of repairs. Oftentimes people spend thousands on home improvements, only to have their equity go up slightly, leaving them with beautiful renovations, but no true “gain” in equity due to the initial amount spent. In general, the renovations that provide the highest boost of equity, often referred to as ROI, (return on investment) include kitchen remodels, bathroom renovations, as well as energy efficient upgrades throughout your home.
From making extra payments on your mortgage to maintaining and boosting your home’s appearance and functionality through home renovations, boosting your ROI is a great choice! Upon selling, you can use your home’s equity as a down payment on your next home, purchase a new car, start a new business, the possibilities are truly endless! Whether you’re hoping to list your home, find a new home, or start your search for the perfect vacation rental, our team of dedicated professionals know the local market and are here to help make all of your real estate dreams a reality! Contact our office today!