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Maximizing Home Equity: Expert Strategies for Increasing Your Property’s Value
Curious about discovering your home’s profit potential? The key is to build equity
Building equity in your home is a key aspect of homeownership. Equity is the difference between how much you owe on your mortgage and the current value of your home. By increasing home equity, you increase your net worth and have more financial security. In this article we’ll discuss how to increase home equity
Outside of stocks and bonds, the largest financial investment opportunity most of us have is to own and sell a home. Building equity is one of the easiest ways to build wealth and, as a result, financial stability. So, how do you raise your property’s value and increase home equity?
Here are a few expert-recommended ways to build equity in your home, and why it matters:
How to increase home equity
Ditch the mortgage insurance
Most buyers have to pay a mortgage insurance along with their mortgage payment for any down payment amount that is less than 20%. That means you’re paying an unnecessary premium for a smaller down payment. Put another way: it is more cost-effective and will help you increase home equity to put down a larger down payment.
This option isn’t available to everyone, especially first-time home buyers, which is why mortgage insurance exists. However, you want to minimize the amount of time you have to spend towards anything other than your principal, so getting to 20% as quickly as you can is in your financial best interest.
Make a bonus mortgage payment once a year
Depending on the size of your loan, you could be making monthly mortgage payments for years without ever touching your principal. That means all your monthly payments are just going towards the interest on your loan, and not the actual loan itself. This is a major impediment to a homeowner who is trying to increase home equity, because it doesn’t allow direct payments to reduce the size of the principal loan.
So, how do you start to reduce your principal? There are a few ways. You can save up for a one-time payment or you can divide your mortgage payment by 12 and pay a little extra on each month’s mortgage payment throughout the year. Another strategy is to switch from monthly payments to bi-weekly payments. So paying half your mortgage payment twice a month instead of paying your whole mortgage payment once a month. Sounds like the exact same thing, but in reality you end up making 26 payments – which is 13 months. So just by changing the frequency of your payments, you can sneak in an extra month’s mortgage premium without being any the wiser.
Wait for the market to appreciate
Time is a powerful tool. As the housing market increases in value, so does your home. As a result, the equity you have in your home also increases.
The market is a general term that encompasses several components: economic trends, commercial development, interest rates, and housing supply and demand make up the most influential ones. Just as markets can get hotter, they can also cool off. If you’re able to wait out a housing market downturn, it’s in your best interest to do so.
Although your home will continue to appreciate even if you don’t lift a finger, when the time comes to sell your negligence could hurt your home’s value. Keep your property from falling into disrepair with general maintenance. Things like painting, cleaning, and updated flooring might not seem like the sexiest improvements but they can increase your property’s listing price.
Increase your home value
Not only does it benefit you to pay down your principal and increase your home equity – you can also take your home’s value into your own hands. In addition to waiting for it to appreciate over time, you can control the demand by making strategic updates in your home.
However, all updates aren’t created equal. For instance, if you’re ready to make home improvements make sure you choose the right updates. Wallpapering your living room probably doesn’t have the same financial return as a bedroom addition, for instance.
You do not need to save thousands to invest in profitable home improvements before selling your property. Curbio works with homeowners and real estate agents ready to sell. We offer turnkey home renovations and repair services and a unique, pay-at-closing business model that makes profitable home sales an option for everyone. Learn more about how Curbio can increase your home’s value.