Home ownership is a big part of the American dream, and something that many people strive to achieve all of their lives. However, many folks are surprised by the number of additional expenses that come with owning a home — expenses beyond their monthly mortgage payment. Home maintenance and repairs, improvements and renovations, taxes that can go up every year, insurance that can skyrocket after a claim, furnishings and supplies, lawn care, utility bills, homeowner’s association fees and more can quickly start turning the dream into a nightmare.
What is Equity and How Do I Begin to Build Home Equity?
Home Equity is defined as the difference between what you owe on your home and its sellable value. This equity can be used to help fund home improvements that can increase the value of your home, or pay off unexpected bills.
For many years, the assumption has been that housing prices would consistently rise over time, creating valuable equity that could be tapped in an emergency or used as needed to pay for expenses. Sadly this is no longer a given, as countless homeowners have found themselves hopelessly underwater when it comes to their mortgages. It has become all too clear that your home equity can be the difference between a safe investment and a financial disaster.
So you’re probably asking yourself, “How do I build equity in my home?” Below you will find a couple of options for building equity and value for years to come.
Make Home Improvements To Increase Resale Value
One way to raise your home equity is by making improvements that will increase its resale value. Because some renovations help a home’s value more than others (and some may even hurt resale value), it’s often a good idea to consult a qualified real estate professional in your local real estate market to see what specific features buyers in your area are looking for.
Pay Down Your Mortgage Debt and Apply Payments to the Principal Loan Amount
Another option when it comes to building equity is to pay down your mortgage debt — the less you owe, the more equity you have. US Equity Advantage’s AutoPayPlus bi-weekly payment program is specifically designed to help you build equity faster. After registering your loan with us, we’ll begin debiting half of your regular monthly mortgage payment every other week from your account. By the end of a year, you’ll have made one extra mortgage payment. One more payment may not sound like a lot, but that single extra payment each year can make a tremendous difference in terms of saving you on costly interest payments and getting you out from under your mortgage debt faster.
The way mortgages are typically amortized, relatively little principal is paid during the early years. AutoPayPlus can accelerate that process and help you build equity faster. That means if you sell your home before your mortgage is paid off, you’ll have more equity at closing. That’s money that can be used for buying your next home, building your child’s college fund, saving for retirement or anything else you want.
How does it work? Here is an example.
Let’s use an example of a $250,000 home loan at 4.25 percent interest. Paying off that loan conventionally would take about 30 years. But by making bi-weekly payments with AutoPayPlus, you’d be done with mortgage payments in 25 years, 9 months and you’d save more than $31,000 in interest. On top of that, you’d be building equity faster — particularly important if you don’t hang onto your house until you’ve paid it off. Check out our bi-weekly loan calculator to see exactly how much time and money you could save on your mortgage with bi-weekly payments.
Home ownership may always be the American dream, but equity is key when it comes to how secure your investment actually is. If you want to start building home equity faster today for a more secure tomorrow, we can help. Give us a call and we’ll be happy to help get you started.