4 Tips That Could Help You Build Home Equity
Home equity is a powerful financial asset, which you can create based on the monthly mortgage payments that you make as a homeowner. Here are some tips that may help you build home equity.
Make a Substantial Down Payment
Depending on your loan program, you might be able to start your mortgage with a down payment of just 3%, or sometimes even without any down payment at all. However, to receive an instant home equity boost, you may consider making a larger down payment. Under all circumstances, make sure you are keeping a sufficient emergency cash reserve as well as are in a position to make your monthly payments on time.
Increase the Value of Your Home
Your home equity is also linked to the current market value of your property. If you make significant home improvements or remodeling, it could increase the property’s value. This will give a boost to your home equity. However, it may not be a prudent idea to make improvements just for the sake of increasing your home equity. You should consider whether you need improvements or remodeling and how far it impacts your living experience.
Increase Your Mortgage Payments
To build your home equity at a faster pace, you may consider paying an additional amount every month toward the principal. The faster your remaining mortgage amount reduces, the faster your home equity will build up. To speed up your mortgage payments, you may also use any extra money that you receive occasionally. For example, you may receive a monetary gift, a bonus from a job, or a tax refund, which can put toward your loan balance.
Consider the Option of Mortgage Refinance
You may consider switching to a shorter mortgage term by refinancing your loan. A shorter loan term may reduce your rate of interest, while it will increase the amount of your monthly mortgage payment at the same time. As a result, your home equity will build up faster if you replace a 30-year mortgage with a 15-year loan.