One of the fastest and most doable ways to build wealth is to build home equity. The value that you build in your home is one of your biggest assets that you can tap in times of need or when you need funding for a large project such as a home renovation.
Building home equity is literally as easy as paying your mortgage. Over time, the money that you pay towards your home grows as part of your home equity, which is defined as the value that you own when you take your home’s market value minus the amount that you still owe. The bigger your home equity, the easier it will be to tap later on when needed. This is one of the biggest tricks in making sure that you get a second mortgage should you need it. You can build your home equity by using the tips below:
Pay A Sizable Downpayment
Paying the largest downpayment that you can afford means starting off your home ownership by owning a large portion of your home from the start. This also means that the sooner you can apply for a second mortgage should the need arise.
Pay As Much As You Can Every Month
Your mortgage is paid monthly with a set amount; however, there is no stipulation against paying more than the minimum required per month so paying a bit extra here and there will not help you fully own your home faster, it can improve your financial profile making other loans possible in the future.
Pick A Shorter Mortgage Term
Not many are aware of this but choosing a 15-year-plan over a 30-year-plan often means paying as little as a few hundred dollars more per month and saving hundreds of thousands of dollars down the road. Always ask to see various term computations so you can determine which one you can afford best.
Be Smart When Choosing Home Improvement Projects
Some home improvement projects boost the equity of your home better, thereby effectively increasing your home equity faster. For example, landscaping your lawn may cost the same as a kitchen floor makeover, but the kitchen floor makeover can bring up the value of your home as well as make it more attractive for buyers. It is all about choosing the wiser investment and going for the one with the bigger returns more so if your funds are limited.
Once you’ve been building your home equity for a while, you may choose to tap it by applying for a second mortgage. A second mortgage can be used to help consolidate your credit card and personal loans so that they can be made easier to pay off and with a lower interest rate. If you’re not after a lump sum loan, you may try for a HELOC to tap your home equity. We’d be happy to explain to you which second mortgage is best for you. Contact us today!