Home equity refers to the percentage of your home that you actually own against your mortgage Kerri Nettles goes into more detail about how to build this percentage.
Home equity can be calculated simply by looking at the amount of money you’ve sunk into your house against the mortgage you’ve taken out. At the beginning of your home purchase, it’s essentially just the down payment you’ve made on your home. For most first-time homeowners, this amount would typically be quite small – seven percent or thereabouts. Compared to the entire price of a house this is generally quite low, which is why many homeowners look to increase their equity. Below, with the help of experienced estate agent Kerri Nettles, we’ll take a look at some of the best ways to build home equity.
“A home is one of the most powerful assets you can own.” Kerri Nettles says. “It’s one possession that almost universally gains value across the board, provided it’s maintained.” Because the market appreciates, the value of homes go up, and that means your down payment (your home equity) increases too.
Kerri Nettles insists that since your down payment is your defacto home equity, the simplest way to increase your home equity is to make a larger down payment. It’s a slight gamble, however, as the longer period of time that you wait to build up a bigger down payment, the less time your property has to appreciate. It’s important that you do the necessary cost calculations before to determine what the most profitable course of action is.
By opting for a shortage mortgage – say a 20 year instead of a 30-year mortgage – you’ll be equity just as fast. According to Kerri Nettles, he only pitfall to this option is that you’ll have significantly higher monthly payments and, as such, will have a harder time qualifying for a mortgage.
Identify the weak spots of your home and improve them to increase the value. Generally, small features like adding new appliances or painting a choice wall won’t have much effect, but if you renovate an entire room such as a kitchen or bathroom, the value of your home – and it’s equity – are likely to spike pretty dramatically. Also ensure you weigh the costs of the improvements against the cost of the improvements, however.