Improving Home Equity – Tips and Benefits, Part 2

Improving Home Equity – Tips and Benefits, Part 2

In part one of this two-part blog, we went over some of the basics of what home equity means and how you can begin to build it. Equity is a vital area to understand for anyone purchasing a home with a mortgage, as it can have a big impact on your future finances.

At City Creek Mortgage, we can help you understand how equity works for any of our emortgage loan programs from conventional options to FHA, VA and others. Let’s look at a few other areas where you can raise or otherwise bolster your equity as you pay down your mortgage over the years.

Retaining Equity

As we touched on in part one, a common use of equity for some is what’s called a cash-out refinance – this is where you leverage the equity you’ve built up over time to take a new mortgage where you pay the same amount, but receive a cash payment that represents this equity.

And while this format may indeed be the right route to take in some situations, it has been badly misused by some. During the housing crash of the late 2000s, so many people attempted this form of refinancing that equity began to go the other way, not providing the same benefits. Many would refinance over and over again anytime they built a little equity, which sucked theirs dry long-term. If you choose to keep your equity in your home, it will be retained and can be used in the future.

Making Smart Home Improvements

The name of the game when it comes to home improvements and equity is return on investment, or ROI. You want the kinds of improvements that impact home value at a greater level than the cost they bring – kitchens and bathrooms are the most common areas here, with stainless steel and stones like quartz always popular. If you’re able to take things a step further and install certain upgrades yourself, you can save the cost of hiring contractors and build equity even further.

Rental Options

Another way to build equity is renting part or all of the property to tenants. There are plenty of fair rental situations that benefit everyone, allowing the renter a great place to live while helping you build equity through their monthly rent.

Down Payment Size

One area you can consider at the very beginning of your mortgage if you want to start out on a good foot equity-wise is making a larger down payment. A down payment is absolutely part of your immediate equity gained in the home – the higher it is, the lower your loan-to-value ratio, the lower your interest rates might be, and your equity will both begin higher and rise faster.

Maintenance and Home Presentation

Home equity grows as your home value increases, so keeping your property in great shape is a good idea here. This is particularly important if you’re considering selling soon, though home values can fluctuate based on appearance even during stages where you aren’t actively looking to sell.

For more on how to raise your equity in your home, or to learn about any of our mortgage rates or loan options, speak to the staff at City Creek Mortgage today. 

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