Everybody wants a place they can call home. It’s safe, comfy, and a significant investment. For one, owning your home save you money from rent. You also hold free rein in personalization without the landlord having to tell you what to do.
Owning your own home also means you can provide a haven for your children to grow and make memories. This is also an asset that you can pass on to your children, and they will thank you for it. It will be a place where they grow and make memories.
Before discussing how you can increase your home equity, let’s define what it means. Home equity refers to the extent of ownership you have over the property. It’s an asset that is considered part of your network.
Now, you can buy a house and a piece of land solely out of your savings or inheritance. You can also purchase them with cash. But the more accessible and more common means of acquiring such property is through a loan or a mortgage. In this instance, the bank or lending institution is interested in the home until you pay off the obligation. It will help you to look into some house and lot packages.
Why is it essential to increase your home equity in the first place, anyway? For one, it can be converted to a liquid asset at any point you need it. It will also serve as reliable collateral. It’s a benefit that you can pass on to your family.
The most important thing to remember is that building home equity takes time. You’re not going to find a shortcut, but there are a lot of things you can do to increase it. Let’s find out the ways you can triple your home equity.
Bigger Down Payment
If you can, the first step is to pay a significant down payment. The reason is simple, and you want to start with a smaller loan balance. Choosing this route will give you a cushion that will help preserve the value of your home equity regardless of where the market value goes. Starting with a more significant down payment will also mean paying a smaller mortgage payment monthly.
Not only do you make smaller monthly payments, but you will also benefit from lower rates of interest. The reason for this is that lenders give more credibility to buyers who put down bigger down payments. They will likely do the same even if you have a lower credit score.
Unfortunately, there are also some downsides to putting big down payments. For example, not everyone has the liquid asset for it. Many will have to tap into their savings or take a long time before getting the funds ready. However, at this point, it pays to note that the advantages outweigh the disadvantages.
Increase the Value of Your Home
The next step to easily triple your home equity is to increase the value of the home itself. You don’t just want to increase its value; you want to maximize it. So how do you do this?
The first thing you might consider is some renovations. For example, you can convert your cellar into a living space or storage. These two things can quickly raise the property’s value because they come within the most in-demand features of a home. After all, buyers constantly looking for a place to settle down, and spacious homes are always appealing.
You can also convert other spaces in the house. If you’re not using the garage, you can convert it into a living area. You can also alter the loft into a room. You might even want to extend the space of the kitchen. These are only some of the conversions you might want to consider because they add value to your home.
When you add value to your house at the end of the day, you decrease the loan-to-value ratio. Its benefit is that the loan you took out for your house becomes less risky to the bank or the lending institution. And, of course, adding value to your home adds to your home equity.
Consider Shorter Loan Terms
Shorter loan terms are by far one of the fastest ways to earn your home equity. It also means you can own your house outright faster. This way, you can put the house on the market sooner, too.
There are many more benefits to considering a shorter loan term. For example, choosing this route will lead you to lower interest rates than take out a long-term loan. Not only that, but you will also benefit from the speed the interest accrues.
Finally, shorter loan terms are more predictable than that long-term loans. You will also be able to determine finances easier with the shorter time frame. That also means it’s more accessible to budget.
Being a homeowner doesn’t stop at the actual owner of the house. That’s just the beginning. The next thing you need to tackle is how to increase your home equity. And you can do this by paying a more significant down payment, renovate to increase its value, and consider short-term loans.