Smart tips to build home equity

If you recently bought a house, are selling your home, or are currently on the market, you’ve probably been exposed to plenty of real estate jargon – from loans to lenders, lines of credit and so on. But, by far the most important piece of verbiage you can take away from your experience: home equity. Home equity is the estimated market value of your home minus the balance remaining to be paid on your mortgage. And for many homeowners, it’s their most valuable asset.  Home equity is a valuable asset when borrowing large amounts for home improvement, debt consolidation, emergency situations and unforeseen transactions. Utilizing home equity loans help save on interest payments and improve monthly cash flow, which helps owners sustain their financial position and lower interest rates without having to deal with unsecured debt like credit cards or personal loans. Plus, it’s tax-deductible! Here are a few tips on how you can start building and benefiting from your home equity.  

Be wise with your money.

Since home equity is calculated by the amount you have left to pay on your mortgage, the easiest way to build your equity is paying up. If you’re in a position to make a bigger down payment when you first purchase your home, you will be able to acquire and build your home equity at an expedited rate. If you have a limited budget, you can still manage to build your home equity quickly by making biweekly payments to your mortgage throughout the year. Not only will it help increase equity, it will also shave down your mortgage term and save you a fortune in interest.  

Add home improvements Tim Taylor would be proud of!

If traditional investing isn’t your style, you can build your home’s equity by investing your time, money and a little TLC toward home improvements and renovations. Easy fixes like bringing in new windows, replacing countertops, carpeting, light fixtures and other features throughout your home can increase your home’s value, thus increasing its equity. When considering what home improvements are a priority, I recommend thinking about the expected value of the project once it’s finished. If it exceeds the initial cost, then it's worth the money and sweat. The same thing goes for your home’s curb appeal. Making your home look good when you list it on the market is crucial. The better it looks, the better chance you have of receiving higher offers. Simple projects can make a huge difference. For example, you can pick up a can of new paint to freshen up the color of your shudders or door, brighten up your porch with nice lighting, spruce up your flower beds with colorful plants and flowers, and clean your gutters. If your home is up to date on improvements, you’re in good shape. But, beware of what’s under the hood. Keep your home in tip-top shape by performing routine maintenance checks, for instance with your HVAC unit and roofing. By taking care of your home and keeping up with handiwork, you can avoid repair requests from future homebuyers after their inspection. It’s a win-win!   

Think outside the box.

There are several ways you can increase your home equity, even a couple of easy, nontraditional ways, like renting out your space or putting gifts, bonuses and extra cash toward your mortgage. By renting out part or all of your property, you can build equity through the rent you collect from tenants each month.  If you’re not looking for a roommate, and not ready to commit to a 15-year mortgage, you can help yourself by saving, saving, saving. Do you get a little something extra in your holiday or birthday cards? Does your job offer overtime pay or yearly bonuses? Save it up and add it to your mortgage! While it’s not as exciting as a present in the present, getting closer to paying off your mortgage and increasing your home equity is a nice gift to give your future self.  -- If you’re looking to buy or sell a home in Sarasota and are curious about your home’s equity, feel free to contact me. With more than 20 years of real estate experience, I’ll share my knowledge and work as a trusted partner and help you find the right fit for you. Call me today at 941-225-1500 or email me at AmyChapman@michaelsaunders.com.