Equity is the difference between the value of your home and the balance of your loan. Equity includes the down payment on the home as well as any other money put towards paying off the home. Zulika Van Heerden discusses the importance of equity in her article. The difference between what is owed on the property and what the property worth is the equity.
According to Van Heerden, it is important to build equity because it helps your credit in the future and keeps from falling behind on the mortgage. The amount of equity increases with each mortgage payment. The amount of principal will decrease with every mortgage payment.
A quick way to build equity is by paying a larger down payment or paying more than the required mortgage amount each month. There is also a chance of building equity if your house appreciates. This means your property value increased since the time it was purchased.
Building equity can be hard to do but brokers suggest owning several properties can increase your chance of building equity. Property is not guaranteed to increase in value but it will most likely increase over time. It is also helpful to increase equity at a quicker pace by owning property in a developing area. The sooner the principal of a loan can be paid off, the better. The interest on the loan will become lower.
Building a home can be more beneficial than buying a home that is already built. Once the construction begins, you can earn instant equity. Equity can help your credit over time and make your chances more likely to buy another home in the future.
Take advantage of a down market and get a good deal on a foreclosure. When the housing market is on the upswing, the value of the home will increase. Most foreclosures require remodeling. Investing in your home can increase its value and increase equity.
According to Lisa Prevost, buyers should invest sweat equity in homes needing extensive repairs. The federally backed lending program, 203(k), covers renovation costs. The loan amount is based on the purchase amount and the value of the house once the renovations are complete. The buyer can gain instant equity if renovations are chosen wisely.
Another important thing to keep in mind is building equity for retirement. Randy Johnson explains how income will decrease once you retire, so having your mortgage paid off can be a huge relief. Having a plan to pay off your mortgage is a good way to avoid problems after you retire.
It is a good idea to start increasing mortgage payments in your forties or fifties. By this time in your life, you should have a stable income and you should be comfortable with your monthly mortgage payment. Increasing your mortgage payments can save you thousands of dollars in interest. Refinancing is also a good option to help pay your loan faster. Building equity is obtainable if you have a set plan so it is important to research and seek the help of a financial expert.
For more information contact Starting Point Home Solutions!