In any mortgage situation, equity is a very important consideration. Equity refers to the difference between the current value of your home and the amount you still owe on your mortgage loan – naturally, most people gain equity over time as their balance goes down and the home appreciates in value.
With greater equity comes many more options. Equity is a big factor in any refinance project, and some people use equity as a nest-egg or to help with other financial needs. At City Creek Mortgage, we can help you build your equity to whatever goal you’re working on – here are some tips for raising your home equity.
Many people who take 30-year loan terms often do so because they simply assume they can’t afford a shorter term, but in many cases, they’re mistaken. These same folks often assume that half the loan term means double the mortgage rate, but this is almost never the case – a 15-year term rarely, if ever, actually doubles payments. Look more closely into a shorter term, and if you can move some things around to make it work, you should consider it to raise your equity more quickly.
Larger Down Payment
With a good credit score, some loans may offer down payments as low as 3.5 percent. But if you’re looking to build equity and you have the funds, consider putting down closer to the traditional 20 percent, or even higher if possible.
Particularly in places like the kitchen, bathroom, garage (doors), windows and outdoor areas for landscaping, home improvements can add significant equity to a home. Investing $400 or $500 in these kinds of improvements will often yield an equity return four or five times that large.
Pay Larger Principal
If you’re able to manage the funds, paying the principal amount off more quickly is the fastest way to build equity. A single extra payment the size of a standard monthly amount can put you seven or eight years ahead of schedule on a 30-year loan, so strongly consider this if it won’t damage other areas of your finances.
Interested in learning more about building equity, or any of our other mortgage loan solutions? Speak to the brokers at City Creek Mortgage today.