One of the main benefits of owning a home is that you can use it to reach a number of financial objectives. You can use this money to pay for major home improvements, eliminate high interest credit card debt or cover college costs.
When can I start building equity in my home?
How much you intend to invest depends on your finances and the type of property. The best way to build equity is to pay a substantial amount of money down on the price of your property, and then continue to make payments.
You should consider making improvements to the property in addition to investing a lot of money. Addition of an extra bedroom or renovations to the kitchen and bathroom can increase the value of your home, and therefore your equity.
Using a higher mortgage interest rate can be another effective way to build equity in your home. You can save thousands by shopping around and comparing rates.
It is possible to increase your home equity by refinancing, although the monthly payments will be higher. Alternatively, you may be able to reduce your mortgage payment by a few hundred dollars each month by making biweekly payments or by paying more than the required minimum monthly payments.
Building equity can take some time, but once you do it's a valuable asset. You can do it by taking out an equity line of credits (HELOC), that is, a secured credit card using your house as collateral. Alternatively, you can get a home-equity loan and borrow the equity amount you have accrued in the property.
What is equity?
The process of building equity can take several years. Making regular mortgage payments is a way to build equity in your home while your property value increases and you reduce the loan balance. This can be done by making a significant down payment, lowering your mortgage interest rate or refinancing.
When you decide to sell your home, your equity will play a major role in the final price. This will affect the price you get for your home, as well as how quickly you sell it.
You can also use the equity in your home to cover any other events that may arise or for emergencies. If you want to, you can use your equity for medical costs or college tuition. You could use your equity as collateral to fund a marriage, purchase a larger or expensive home, or start a small business.
In order to borrow money against your home, you need to have at minimum 15% to 20% equity. It's true that most mortgage lenders want you to have a certain amount of equity in order to be able borrow against your home.