Because buying a home is oftentimes one of the most expensive purchases any homeowner can make, it should also be thought of as one of the biggest investments that should be nurtured and grown as part of your financial planning for your future. This can be done by building one’s home equity and making sure that the home’s value increase over time instead of depreciating. The good news is, home value appreciation happens on its own for most Canadian neighbourhoods. As one of the most progressive nations in the world, real estate in Canada continues to increase in value as is the trend for the past decades. But how can a homeowner help with building one’s home equity? Are there ways to fast-track this aside from making sure that mortgage payments are made on time?
Why Build Home Equity?
Home equity is like a specialized savings account. Once a homeowner has a certain percentage of home equity, the homeowner can access it to fund other investments such as paying for education, starting a business, placing downpayment on a rental property, or even for renovating the existing property to further drive up the home’s value. The higher the value of the home, the higher the value of the home equity built by the homeowners as well.
The first step in building home equity is to be aware of how much home equity you currently have. Bring out the calculators and see how much you have to better plan ways on building more home equity and see which of the tips below are applicable for your specific situation.
Tips to Build Home Equity Faster
Tip #1 – The first tip to building home equity may be a little too late but worth to note if you’re still planning to buy a home. You must try to make the biggest downpayment that you possibly can. With a big downpayment, your mortgage interest may turn out significantly lower and will allow you to make payments count more. Your downpayment is also your instant home equity.
Tip #2 – Get a short mortgage. If you are given a choice between a 30-year mortgage and a 15-year one, pick the shorter mortgage as long as you can afford the monthly payments. The mortgage may be higher but it also means you will gain home equity faster and save on interest.
Tip #3 – Just pay more on your mortgage. Depending on your mortgage, paying your mortgage as much as you want to pay for each month can work wonders. This is especially true if your payments are credited properly against your mortgage principal. You can pay more on your mortgage by allocating bonuses or any extra income for payments. You’ll be surprised at how big of an impact a few years of paying extra mortgage can make for your overall financial health.
Tip #4 – Spend on home improvement to increase your home equity. Remodeling and renovating can cost a lot, but because they add value to your home, they can drastically increase your home equity.
Once you’ve built-up your home equity, you’ll be in a better financial position and have easier access to funds should you need them. You can even use your home equity as a retirement fund! If you’re interested to know more about accessing your home equity in the future or further building your home equity now, do not hesitate to contact us at Homebase Mortgages.