Every homeowner wants to build equity in their home, but some methods work much better than others. These three are some of the best ways to increase equity.
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If you want to build equity as a homeowner, some strategies work better than others. The top ways include:
- Making as much of down payment as you can: Every penny you put down on the front end should come back to you as equity. As the home appreciates, you're essentially putting money back in the bank. If you can put down 5%, 10%, or 20% down, you're in good shape. The myth that you need to make a 20% down payment to buy a home is simply false, but we still encourage you to put down as much as possible to build equity and lower your monthly payment.
- Make improvements to the property: This is as simple as improving a roof that needs to be replaced or bringing the home's siding up to par. When looking for a home, watch out for the kinds of things like that, which will allow you to build equity through improvements. Spending $3,000 to create $7,000 in value is money well spent.
- Make bi-monthly house payments: Making bi-monthly payments adds up to an extra mortgage payment each year. Making that one extra payment per year can literally shave years off of the life of your loan. Look at the amortization schedule to see which percentage of your payment goes to interest and what percentage goes to the principal. You want the largest percentage possible going toward the principal, and making bi-monthly payments increases it.
Making one extra payment each year can shave years off the life of your loan.
