Build Home Equity Faster

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Real Estate

Build Home Equity Faster

Home equity is the part of your property you actually own. For instance, if your property’s worth $250,000, and you have a mortgage with a remaining loan balance of $100,000, your equity in the property is $150,000.

Naturally, building home equity comes at a price, usually in the form of larger payments. If building home equity means incurring debt to make ends meet, then you’ve defeated the purpose of building equity in the first place.

The first option in home equity building is to make additional principal payments. One way to do this is to sign up for a bi-weekly mortgage, in which you make two payments per month (which added together equal one monthly payment). You will make the equivalent of 13 monthly payments per year instead of 12, which may seem insignificant. But a 30-year loan with a bi-weekly payment plan is usually paid off in about 20 years.You can also add small extra amounts each month to your principal payment by identifying as such on your mortgage payment. 

The other way to build home equity faster is to refinance. If you had a $200,000 30-year ARM at 8.13 percent and replaced it with a 15-year fixed rate loan at 6.75 percent, your monthly payment would go from $1485.69 to $1769.82. You would save $200,000 in interest and build the same amount of equity in half the time.

Of course in purchasing a new home there are features to consider that can affect your resale potential down the road which in turn would possibly affect how much you could sell it for which also plays into how much more you can sell your home for than what is still owed on the loan.    Certain renovations and updates can also make a difference as well.

It is always good to speak to a reputable Realtor to determine the right strategy and to understand how much you could walk away with when selling a home.