When you build equity in your home, you increase the value of what may be the largest asset you own. Equity refers to the value of your home, minus any mortgages on the property.
You may buy a house for $300,000 with a $200,000 30-year mortgage, meaning you have $100,000 in equity. If you can increase that equity to $200,000, you are worth more, and you may be able to get financing against that amount. With more equity in your home, you can also enjoy more cash back if you sell the property, or you can use the equity as the down payment for more real estate.
Here’s how you can build equity:
- Home improvements: Renovations cost money, but if you choose projects that improve the value of your home, you may end up gaining more value back. To get the best return on investment, consider completing some projects yourself and focus on higher-value improvements, such as renovations on bathrooms, kitchens, energy efficiency and landscaping, which tend to yield the highest increases in home value. Also, consider completing projects with cash instead of financing where possible, so you’re not paying interest on your home improvements.
- Work on your neighborhood: Homes in good neighborhoods are worth more. You can set up or join a local community or homeowner’s association and work with your municipality to keep your neighborhood as desirable as possible. This may mean discouraging absentee landlords and poor home maintenance or setting up initiatives that attract young families and professionals.
- Change your mortgage: The faster you pay off your mortgage, the more quickly you will build equity. You can pay extra or choose a mortgage with a shorter term so you can pay off the debt faster, pay less interest and enjoy more equity sooner.
- Do nothing: Your home’s value will automatically increase with inflation and as the cost of homes rises. If you have a mortgage and keep paying it off according to schedule, you will slowly be building equity, even if you do nothing else on this list!
- Make a larger down payment: If you’re just buying a home now and are thinking about equity already, consider putting down a larger down payment. It may be easier for you to qualify for a home loan with more money down, and you will enter financing with more equity in the property. Your monthly payments may also be more affordable.
- Time sales: If you are thinking about equity because you want to sell, keep in mind that the timing of your listing can have an impact on the perceived worth of your home. The same property can sell for very different amounts depending on housing supply, the number of interested buyers and other factors. If you want to sell, do your research and get ready to move when market conditions create a seller’s market.
Ready to Sell?
If you’re ready to take advantage of your equity by selling, make sure you have an experienced agent who can help you sell your home for the best price possible. Need a good agent? Contact us at CENTURY 21 Core Partners to get the advantage that comes with working with a dedicated and professional real estate agent who is committed to your home selling success.