What Is Equity?
Equity is the fair market value of your home vs the difference owing on your loan. Over time as house prices rise you will slowly gain equity on your home. Obviously economic factors will affect the real estate market and how quickly home prices will rise or even fall.
According to Statistic Brain 38% of Americans do not save anything for retirement. Unfortunately we all know that money doesn’t grow on trees. If you don’t want to be a part of this statistic here are 6 tips to gain home equity for a healthier financial future:
Save More For Your Down Payment
Having an adequate down payment typically means obtaining a lower mortgage rate from your lender. In turn the higher amount you are able to come up with, the less you will owe on the principal balance of your home. Additionally your monthly payments will be lower. 20% is the standard number for a deposit, however, the more you can save the better.
Choose A Shorter Mortgage Plan
Your home is the largest investment you will make and when looking at your repayment options you should choose carefully. With lower monthly payments a 30 year repayment plan will same like the “safe” bet. Compared to a 15 year plan you will pay about twice as much in accumulating interest and other fees along the way. Visit Investopedia for more information on this loan comparison that will save you thousands over the years.
Higher Loan Payments
Sometimes appreciation can run at a turtle’s pace. Instead of waiting for the value of your home to rise on its own, put the effort in to pay down your mortgage. If money is tight, use any additional income such as a job bonus to put towards your balance. Although these slight payments may seem small-scale in comparison to the value of your home but over time extra payments can shave off years of your mortgage.
Make Biweekly Payments
Cut down on your mortgage term and save a massive amount in interest by making biweekly payments. In a nutshell you’ll be pay 13 payments a year instead of the traditional 12. The math is simple and you will pay off your loan a few years sooner.
Determine Smart Home Improvements
Spend money to make money! If you put your money into the right places to improve your home you will see a return on your investment. A beautifully updated kitchen is always something that buyers are looking for. Additionally new appliances and floors typically get a good return. For more ways to boost value on improvements visit This Old House.
In summary, putting more money into your home is going to make you money a lot faster by gaining equity. Follow these steps and rest easy knowing that you are on your way to enjoying an easy retirement.