Building Home Equity: A Guide
While it’s certainly possible getting into homeownership with little investment upfront, there are several benefits to building home equity in a property. If you aren’t sure what home equity is, it’s the difference between your home’s value and what you owe on your mortgage. For instance, if your home’s value is $300,000 and the amount you owe is $175,000 on your mortgage, you have $125,000 in home equity. Home equity increases in two ways—paying down your mortgage and/or increase in home’s value.
Having a good amount of equity in a property helps protect against foreclosure when faced with financial hardship. It can be a valuable source of emergency funding and makes it much easier to refinance or sell your home when you need to.
With that in mind, we put together this guide to help you build your home equity. Take a look.
Be Patient and Let Your Home’s Value Increase
In most places, real estate markets tend to increase in value over time due to inflation. The prices of real estate go up just as the prices of most other things. When it comes to housing, location and neighbourhood are important factors to consider when considering an increase in value and building equity.
Pay Down Your Mortgage Faster
Every monthly mortgage payment made reduces the amount you owe, which in turn increases your share of the equity. Initially, most of your payment goes towards the interest. Paying down the principal balance, however, will speed up the process. You can do this by adding additional mortgage payments every year or increasing the amount you pay every month.
Increase the Down Payment
If you’re about to buy a home, you could consider building equity by increasing the down payment from the minimum required amount.
Making Home Improvements
You could also increase the value of your home by making renovations and improvements that add value. This is best done by consulting a real estate professional because not all home improvements increase value by much.
Maintain the Property
You will lose equity if you don’t maintain your home regularly and instead let it fall into disrepair. Ensure the HVAC system, the roof, the interior, and the yard are all maintained well will help you grow equity over time.
Amansad Financial is among the leading private bad credit lenders in Edmonton, Canada. If you require alternative mortgage financing options, a manufactured home mortgage loans, or equity loans, give our experts a call at 1(780)756-1119 or apply for the right mortgage here.