Think of your home as a large piggy bank. With every monthly mortgage payment, you’re putting money into that piggy bank. If or when the time comes that you need it, that equity is there to use to your liking. So how can you increase your home equity at a faster pace? See here.
Make an Extra Principal Payment
Not only will you pay less interest over the life of your loan and shave years off your mortgage term, an additional principal payment here and there will also help you gain equity in your home at a faster pace. But paying down a mortgage isn’t the right financial move for everyone. You’ll need to analyze your mortgage rate vs the returns you expect from investing.
Complete Value-Adding Home Renovations and Improvements
Because equity is the difference between the value of your home and the amount you owe on your mortgage, increasing home value increases your equity. Certain home improvements and home renovations are known for getting homeowners a great return on their investment (therefore increasing home equity), such as:
- Minor kitchen and bath remodels
- Replacing dated items (popcorn ceilings, paneled walls, builder-grade woodwork, etc.)
- Well-kept landscaping and curb appeal
- Updated flooring
- Garage door and entry door replacements
Refinance Into a Shorter Loan Term
If you haven’t taken advantage of the low mortgage rates the market has seen over the last several years, you may want to consider a shorter loan term, especially if you plan to stay in your home for a long period of time.
Homebuyers who finance with a 15-year fixed mortgage gain equity at a much quicker pace than those with traditional 30-year fixed mortgages. Though a shorter loan term increases the size of your monthly payments, shorter loan terms typically come with lower interest rates, allowing you to deflect mortgage interest at a faster pace.
One major financial perk of homeownership is home appreciation, which allows you to simply sit back and watch your home value rise, creating more equity. That is, as long as you keep your home in good condition with regular home maintenance.
If you’re interested in seeing what your equity can do for you, download one of our free mortgage guides below!