Great Ways to Build Your Home Equity

June 21, 2018

What is home equity? Home equity is the percentage of your home's value that you own and it's key to building wealth through homeownership.




How much equity do you actually have?  It's easy to calculate when you first buy a house because it's more or less your down payment. We have some tips to help you build the equity in your home.


Let Your Home Appreciate:

The amount of time on this will vary depending on the market, but with home prices going up over the recent years, appreciation is booming for many homeowners.  Reports have shown that since April 2016 home values have increased about 16%. Home appreciation is a lot like investing in the stock market. You benefit if the market value goes up. There is also a difference: your exempt from paying taxes on primary-home capital gains up to $250,000 (or $500,000 for a married couple).

Waiting to "save enough" isn't the number one factor in deciding if you can afford to buy a house or not.  When it comes to qualifying for a loan, the lenders will look at your down payment.  They also need to know how much you will have in cash reserve after you leave the closing table. 

Your monthly budget is the biggest factor that a lender will take into consideration.  Most lenders will allow you to spend between 43 and 49 percent of your income on monthly bills. To be honest, that is putting a huge strain on your wallet. 


Use Financial Windfalls:

Take advantage of work bonuses, family gifts and any other unexpected money that comes your way to pay down your mortgage. If you do start paying your mortgage down in lump sums, ask your lender if they will recalculate your payment based on the new lower balance. 


Make Biweekly Payments:

If you schedule your mortgage payments every two weeks (with your paychecks) instead of once a month, over the term of the year you will actually make 13 monthly payments instead of 12. You'll build equity quicker this way and shave about 5 and a half years off of a 30 year mortgage. 





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