Four Ways to Build Home Equity Before You Move
July 9, 2018
Whether you’re planning on moving or you’ve just moved to a new home – home equity is always important to maximize and build. Before we dive into some equity building tips, let’s lay some groundwork.
What is home equity? It’s defined as the percentage of your home’s value that you own.
How do you calculate home equity? When you first buy a home, your home equity equals your down payment. For example if you put $10,000 on a $100,000 home, your home equity is 10%. After that it can be calculated by taking your total loan amount, minus how much you owe as a percentage of the total.
1. Use What You Get: Consider committing to pay-down your mortgage loan by putting any bonuses or financial windfalls into building your home equity. When you pay down your loan via lump sums, your lender will recalculate your payment based on a lower sum owed.
2. Get Aggressive With Payments: Consider doing bi-weekly vs. monthly payments. This small change could save you 5-6 years off a 30-year mortgage in just a year.
3. Make The Right Improvements: When you consider how to make improvements that will improve your home equity, be careful not to put all of your investment dollars in things like paint and appliances. Improvements that count towards home equity include things like kitchen upgrades, additional bathrooms or finishing a basement.
4. Cut Loan Terms: Change your loan terms from a 30-year- loan to a 15-year-loan. Then you can pay your loan off twice as fast and build your equity twice as fast as well.
Once you build up your equity, you can access the equity by selling your home or taking out a home equity line of credit or by doing a cash out refinance.
The best thing to do is talk to a lender to determine your best next steps. Once you sort through the best way to build equity, we are always here to help you with the next chapter of your life. Give our team at Beltmann a call and we can make this next move a stress-free process!
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