The process of building equity faster
Think about the several benefits to owning a home. There is the feeling of ownership, improved credit, a better return of investment in the future and other contributing factors. Another common benefit homeowners and future home buyers tend to forget? Building equity.
What exactly is equity? Nerdwallet states home equity as a long term investment where your money is locked up and kept away. Equity is the sense of your current market value of your home, minus what you owe.
When you pay on your house it’s almost like a forced savings account. A house that is considered rich in equity means the debt on the property itself is less than 50% of the current home’s value.
How do you get to the point of being “equity rich” with your home?
Part of every mortgage payment goes towards paying off your loan’s principal and interest, where your interest covers most of the principal amount. If you pay down the principal faster, your equity should increase faster.
Another way to help build equity with your mortgage payment is dividing your monthly payment into two bi-weekly payments once a month. This will help you clear your mortgage faster and thus building equity more. One thing you need to do here is pre-check this availability with the loan providers.
Shorter loans force you to pay a larger amount on the debt and this builds your equity faster than long-term loans. A 15-year mortgage will build equity faster than a 30-year mortgage.Another bonus with a shorter loan is a lower interest rate.
Larger down payment
You can make a larger down payment at the outset to automatically acquire home equity. While this may seem like you’re putting money in an illiquid investment, more equity means a lower loan-to-value ratio, which equates to a lower interest rate and easier-to-obtain financing. This also helps overall with mortgage rates, interests on these loans, eliminating the need for mortgage insurance and other factors. Over time, the lower rate will mean less interest paid and more equity built.
Refinancing your home
Refinancing your mortgage is an easy way in building equity faster. This is typically done when a home improvement is needed and sometimes other expenses in life come up. When you refinance on your home’s equity loan, it can mean lower interest rates. You can convert the loan from an adjustable-rate to a fixed-rate, a shorter loan term, avoid balloon payments and get more cash!
Adding value to your house
If you are looking to sell your home soon, an Omaha real estate agent can help you. The best improvements and additions one should add to get the best equity back on a home:
- New rooms and spaces
- New windows
- Basic Maintenance
Making some noticeable changes and adding more amenities to your house can eventually increase the market value, which means more equity for you.
The first step in all of this is building equity! This can be simple with an Omaha real estate team like the Fairfield Team. These are the current listings in Omaha with our team. Once you have a home and mortgage, you can start on equity. You can’t run before you walk.