Home equity is a big part of owning a home, as it is the value of your interest in the home. In other words, how much of the home you actually own. Home equity can be used for numerous things such as a home equity line of credit, home equity loans, and refinancing your mortgage.
To safety build home equity throughout the time living in your home, follow these three tips:
Make A Big Down Payment
Making a big down payment upon closing will grant you more equity in your home than a smaller one. The general guideline is to put down at least 20% down on the home to give you a boost of home equity and avoid PMI (Private Mortgage Insurance).
When making a larger down payment, it may give you a head start in home equity, but it may not be where you should place all of your money. Remember, it is okay to make a smaller down payment. Review all of your financial goals before making a larger down payment.
Make Larger Payments Per Month
Making larger mortgage payments each month is another way to safely build your home equity. For example, if you normally pay $1,000 per month, paying an extra $200 can help pay off your mortgage more quickly and build home equity. If you do decide to make extra payments, be sure to touch base with your lender to ensure that those “extra” payments are going towards the loan’s principal, not its interest.
Again, if you cannot afford to make larger payments per month, that is ok. You should keep your finances in mind so you find yourself “strapped” for the essentials things like utility bills and groceries. Instead, you can throw extra cash at it when you get extra money at holidays or as bonuses, or even your tax return.
Renovate The Inside Of Your Home
Renovating the inside of your home to make improvements can help you raise the property’s value. And the best part? These improvements don’t have to be expensive! Repainting, updating lighting and door fixtures, and other easy improvements can go a long way in giving your home that step up.