Home equity is the key to building your wealth through home ownership. Technically, it is the amount or percentage of value of the home that belongs to you. There are several ways you can build the home equity without having to go out of your budget. The best thing about home equity is that it is easily accessible and you can use it to get more profit from your home or get new real estate property.
Equity is different at different stages of home ownership. When you first purchase a home, your equity is the amount of down payment you make. Therefore, if you put down $10,000 for a home worth $200,000, your equity is immediately 5%. Keep in mind that the amount of down payment you put down on a home depends on the mortgage lender.
So how do you build the home equity? You can try and build the home equity on your own or get a real estate agent or professional to help you find the best method for you. Sometimes, you do not have to do much for your home equity to grow. For instance, you can let the value of your home appreciate and the equity will increase automatically. This may take you some time but it is totally worth it. The value of your home will appreciate depending on the location, market, home design and other factors. If you bought your home in the right location it should be able to attract some growth.
If your home value grows from 200,000$ to 230,000 in a period of two years, your equity will automatically increase from 5% to a much higher number. You will calculate the new equity by subtracting the loan balance from the current home value and dividing it by the different in the current value of the home.
Simply make a larger down payment to grow your equity. If you have enough money in your savings to make a large down payment you should defiantly go for it. This will give you a large home equity immediately you make the home purchase. if you do not, do not wait to save the money in order to make the down payment. The more you wait the more the chances of the home value appreciation. Do not lose your chance to increase your home value through property appreciation.
Making biweekly payments will increase your equity more than paying monthly mortgage payment for the home. Biweekly payments add up to 13 monthly payments instead of 12. In the long run, this can scrape off several years off your mortgage payments while increasing your equity at the same time. Ensure your lender does not have extra charges for people who make biweekly payments because that may defeat the purpose.
Making home improvements is the perfect way to increase your equity. Home improvements create a win-win situation for home owners. Improvements to the property will leave it looking new, modern and comfortable and it will appreciate in value faster. big improvements in your kitchen, bathrooms, ceiling, floors, wall and roofing will protect the home from any break-downs and increase its value immediately.