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6 Strategies to Build Home Equity

View of Wilmington North Carolina from across the river

Simply defined, home equity is the percentage of your home’s value that you own, and it is the key to building wealth through homeownership. It can be your greatest financial asset, your largest component of personal wealth, and your protection against life’s unexpected expenses. Here are six ways on how to successfully build your home equity!

Home Appreciation

Building equity through appreciation can take little time or a lot, depending on the market. With home prices going up like they have in recent years, appreciation has been a boon for many homeowners. Per Zillow Research, there is data that indicates that the median home value grew between 2016 and 2018. Price increases, however, can also be linked to inflation and not a real appreciation of the value of the house. The biggest determining factor on home appreciation, however, is location, location, location!

Down Payment

Equity is easy to calculate when you first buy a home because it’s basically your down payment. For example, if you put $12,500 down on a $250,000 home, your down payment is 5% and so is your equity. So essentially, the larger the down payment, the more home equity you will build from the start. However, this decision should be based on your financial situation and what loan works best for you. A good loan officer can help you strike the right balance with the down payment, monthly budget and savings for other priorities.

Financial Gains

Take advantage of any financial windfalls or gains that come your way. Work bonuses, family gifts and inheritance sums can go a long way in paying down your mortgage quicker while also building home equity faster.

Biweekly Payments

To pay off their mortgages faster and pay less in interest over the loan’s lifetime, some homeowners choose to make bi-weekly payments instead. Bi-weekly payments mean that you’re paying half your monthly amount once every two weeks instead. There are 52 weeks in a year, so this works out to 26 bi-weekly payments or 13 monthly payments.

15-Year vs. 30-Year Mortgage

If you opt for a 15-year mortgage or refinancing into one from a 30-year loan, you will heap on the equity while also enjoying a lower interest rate. Also, since you will pay interest for a shorter period, you will save a lot on the total interest. Just remember that your monthly payments will be higher with a 15-year home loan.

Home Improvements

Investing in big improvements like new kitchens, or additional bathrooms or other rooms will add value to a house. Make sure the cost of such improvements will create the added value you want. As you ponder your options, also consider your market. In a buyers’ market, you’ll likely need to do more work to help your home to stand out while you will face less competition in a sellers’ market.

4 Tips for Long-Distance House Hunting

Searching for a house locally can present its challenges, but it can become infinitely more complicated when you add in hundreds of miles to the equation.

5 Tips to Boost Your Financial Wellness

Recognized annually in January, Financial Wellness Month reminds us to think about our financial well-being. The timing is perfect with the end of holiday season spending, the beginning of New Year’s resolutions and prepping for tax season. Here are some strategies to help you make financial wellness decisions in 2023!

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Equal Housing Lender LogoALCOVA Mortgage LLC | NMLS#40508 | (www.nmlsconsumeraccess.org)
Licensed in AL, CO, DC, FL, GA, KY, MD, NC, OH, PA, SC, TN, TX, VA, WV | 308 Market St SE, Roanoke, VA 24011

 

 

 

 

 

 

 

 

 

 

Equal Housing Lender LogoALCOVA Mortgage LLC | NMLS#40508 | (www.nmlsconsumeraccess.org)
Licensed in AL, CO, DC, FL, GA, KY, MD, NC, OH, PA, SC, TN, TX, VA, WV | 308 Market St SE, Roanoke, VA 24011