uilding home equity is a crucial financial decision that helps your make valuable investments. NextDoor Property Solutions is here to help you find multiple ways to help you build you equity on your home!
What is Home Equity?
Simply speaking, home equity is the difference between your home's fair market value and what you owe on the outstanding balance of all liens. Also known as a real property value, your home's equity appreciates when you make payments against the mortgage balance, or when your property value increases.
For example, let's say your home is valued at $100,000 and you owe $40,000 your home's equity would be the $60,000 in between. As a general rule, the greater the positive number in home equity, the better. You gain equity primarily from paying down the principal balance of the home loan through your monthly mortgage payments, or by an increase in your home's market value.
How To Improve Home Equity:
Make Bi-Weekly Payments
There are smart budgeting strategies to help you build equity faster without feeling a big financial impact. For instance, 26 biweekly payments instead of 12 monthly payments gives you a predictable, smaller payment but ends up paying an extra month of your mortgage each year.
Paying off your mortgage earlier than the prescribed schedule builds equity faster but also spares you extra interest costs over the life of the loan. Here's an example of how much you can save on interest , and how much more quickly you can pay off your mortgage, by making biweekly payments on a 30- or 15-year mortgage:
Starting Loan Balance Loan Term Interest Rate Biweekly Payment Extra Paid Per Year Interest Savings Mortgage Paid Off
$300,000 30 years 3% $632.41 $1,264.82 $21,418.07 During Year 26
$300,000 15 years 3% $1,035.87 $2,071.74 $7,864.85 During Year 13
Invest in remodeling & home improvements
Besides paying down the cost of your loan, one other primary source of equity growth occurs when you increase the property value of your home . By upgrading your home through projects like a kitchen remodel , you could be adding equity to your property down the line. Whether you're hiring a professional or approaching your remodel with DIY in mind , you can boost your home's market value and see a significant increase to your home's equity. A home worth more than you owe is the goal and a great way to get you there is by investing in property improvements.
Appreciation
Over time it is unlikely the value of your property will remain the same as when you originally purchased it. While property values can go up or down, the national average for home appreciation is 3% per year. If you live in a neighborhood where property values are going up overall and you've maintained your property well, the amount of your equity will increase as well. Building equity through your monthly principal payments and appreciation is a critical part of homeownership that can help you create financial stability. It's important to note that some markets appreciate faster than others. It's also possible for home values to depreciate due to economic conditions, your home not being kept up or a drop in neighborhood home values.
With NextDoor Property Solutions you can tap into that equity. Whether that's with a cash offer for your home, or one of the other many other ways we purchase homes. Even if you have little to no equity, we at NextDoor Property Solutions are there to help you get the most out of your property.
