One of the biggest benefits reaped from buying a home is home equity. Home equity is the market value of a homeowner’s interest in their real property, or in layman’s words, the difference between a property’s market value and the outstanding balance of all liens on the property. When you buy a home, you increase your home equity with every payment. With every payment towards a house, the property’s value appreciates, making the property more valuable in the case of a refinancing or a complete sale of the home. A house will always be valuable, the amount of value tied to it is dependent on how much of a home’s value you finance and therefore control. Knowing what we know about home equity, how exactly can you increase it? Below, I’ve listed a few options.
- Make larger mortgage payments – Paying your mortgage as is will always gradually increase your homeowner’s equity but making larger payments will deliver more equity in less time.
- Refinance into a shorter mortgage term – When you refinance your mortgage, you’re crunching down the amortization period while also paying off your mortgage in less time, ultimately bolstering your homeowner’s equity.
- Make continual home improvements – Want your home to be more valuable? Make it more valuable. Make repairs and renovations that you would’ve loved when it first discovered the property. The more appealing a house is, the more valuable it is on the market, and the more home equity you’ll gain.
- Rent out your home – If making larger mortgage payments isn’t an option with your budget, look into renting out your home, this can get you some additional income to put against your mortgage and we know what happens when you do that.
- Bigger down payment – Naturally, by making a larger down payment, you’re chopping off a larger part of your mortgage, which only gives you more home equity, to begin with.
Why does home equity matter? Because you can profit from your own investment, it’s easier than you think. Home equity serves as security, much like a good credit score would. Home equity loans allow you to borrow against your home’s value over the amount of any mortgages on the property. You can gain access to larger loans and thus larger pockets of money, by demonstrating your strong financial reliability and responsibility through great home equity. If you want to learn where your home equity stands today, contact your mortgage expert to learn more.