When you purchase a new family home, you are entering into one of life’s most significant investments. Your home is more than a place to build memories and lay your head at night.
Your home is a financial asset. You may choose to one day sell your homes, and what you do between now and then will make all the difference in the price you reap.
Taking the time to build equity in your home can help your financial situation down the line in many different ways. Check out a few ways to build equity in your home, so you’re always in charge of your investment.
Make a huge down payment for Home
You can start building your home’s equity from the day you make your purchase. You’ll gain instant equity when you make a fat down payment on your mortgage loan.
Be smart about your financial planning when you buy your home, so you are able to put down more than 20 percent on your purchase. (or up to 50% if you’re using a reverse mortgage loan.
Making a down payment larger than 20 percent of the total loan will not only build instant equity for your future, but it will allow you to avoid having to invest more money in paying for private mortgage insurance.
PMI can be pretty expensive, and it is required of home buyers paying a lower down payment for their property.
Pay off your mortgage faster
The more you pay over the required amount of your mortgage payment each month, the more money actually hits the principle of your debt. Paying the required amount every month will keep you safe inside your homes, but it won’t do much to build the equity in your investment.
Paying double mortgage payments each month will help pay off your home and build more equity much faster than paying the minimum requirement.
Consider this point from the very beginning of the financing process, and set the situation up to make it easier for you to pay more than the minimum payment each month.
Focus home improvement strategically
Not all home improvement projects are created equal when you’re working to build equity in your home. You won’t typically recover the whole cost of improvements on your home, but some projects provide a higher return than others. Do a little research before you go purchasing homes improvement supplies, and use your money wisely.
Wait for natural market growth
Your local market values will shift as time passes, and you can watch equity growth by watching the market growth. Pay your mortgage payments on time, and wait until the market hits a peak to try and sell your property. This way, you’ll get more out of your investment with very little extra work on your part.