Within the mortgage world, “equity” is a term you’ll hear a lot. In simple terms, it refers to the difference between your home’s value and how much you owe on your mortgage. As such, as you pay your home loan balance and the house appreciates in value, you tend to gain equity over time.
The more equity you have in a home, the greater your options. You can use equity as a future nest egg, or cash to put on your next home – many people even receive a home equity loan to help with other debts or financial needs. At Altius Mortgage and our partners at Mortgage Ogden, our brokers are here to help you build as much equity as possible in your home. Here are some tips, both for before you sign a mortgage and after.
Pay More Principal
If your home is appreciating slowly, you can build equity by paying down your home loan quicker. An extra mortgage payment can make a huge difference in equity, and toward paying off the home – consider that a single extra payment per year can put you seven or eight years ahead of schedule. If you can find the funds in your budget – some people use a tax refund or a work bonus, or make the “extra” payment by adding a small amount to each month instead – this is one of the fastest ways to build equity.
Look to Shorter Terms
Many people automatically look to 30-yer mortgage plans, thinking the 15-year plans are out of their budget. But they’re often much closer together in mortgage rates than you might think – a 15-year term rarely, if ever, actually doubles your payments. If you can afford larger payments in the short term, think seriously about a shorter loan period.
Larger Down Payment
If you have great credit, your down payment could be as low as 3.5 percent for some loan. To build equity faster, though, consider putting down a larger amount, up to the traditional 20 percent.
Home improvements can add significantly more value to the home than you’re actually spending in many cases. Upgrades in the kitchen and bathroom are particularly valuable, as are garage doors, windows and outdoor landscaping concerns. An investment of between $400 and $500 to a basic home improvement can often bring a return four times that size.
Want to learn more about building equity in a home, or any of our mortgage services? Speak to the brokers at Altius Mortgage today.