Equity is the difference between the current market value of a home and what is owed on the home - often an unappreciated tool for future wealth-building. Below, we evaluate a few ways to build your home equity.
1. Time.
It takes time to recover from the closing costs paid when purchasing a home, so that you have enough equity to sell at a profit and buy a better home. The five-year rule suggests that the typical homeowner will build enough equity in that timeframe. The longer you remain in your home, the more equity you’ll build through market appreciation and paying your mortgage.
2. Money.
Your down payment shows the lender how seriously you’re taking homeownership - a down payment of 20% or more of the purchase price of the home is enough to help you qualify for a conventional loan. It’s also the fastest way to build equity. You can build additional equity by adding money to your monthly payments to pay down your mortgage faster.
3. Care.
Homes require a lot of short-term (lawn mowing, cleaning) and long-term (home improvements) care. Sooner or later, you’ll have to perform repairs and renovations. These are necessary to maintain your home’s structural integrity, not to mention market value. What you want to do is take care of issues as soon as they arise.
When it comes time to sell your home, you’ll receive the top dollar possible when your home is in excellent condition. But, if your home has been allowed to deteriorate, homebuyers will pass it up or give you a low-ball offer at best.
Curious to know how much equity you have in your home? Reach out to one of our agents today for a market value assessment or appraisal.
Connect