Building Your Equity Faster

 


Equity is the difference between the value of your property and what you owe on your mortgage, if     you have one.  It’s the share of the property that you actually own, not what the bank owns, until your mortgage payments are completed and you own your property in full.

Equity usually means more profit when it’s time to sell.  If needed, it can even provide cash through a home equity loan or cash-out refinance.

Unless you have a negative amortization loan or a reverse mortgage, equity automatically increases monthly when you make your mortgage payment.  However, there are way you can grow your equity more rapidly.

1.       It starts when you purchase your home in an “up and coming” market.  If home values in your neighborhood are going up, your property value is rising as well, if you maintain you home.

2.       When buying a home, increase your down payment or, after buying, make a lump sum payment dedicated to principal to increase your equity. Consider putting your tax refund directly towards your mortgage principal, also knows as the mortgage balance.  Note:  When making additional payments on an established mortgage always indicate that you want the extra funds applied to the principal. 

3.       Pay more on your monthly mortgage.  Making additional principal payments allows you to pay the mortgage off faster, the equity rises at a faster rate, and less of your payment goes toward interest!  Be sure to designate the additional funds are to be applied to the principal.

4.       Renovate.  Home renovations increase your home’s value which is reflected in the amount of equity you have in the home.  This means you have the pleasure of the newly added home features, your home is worth more, and your equity has increased!

5.       Refinance.  With lower interest rates you may be able to afford a 15 -year mortgage payment schedule instead of a 30-year plan.  Your equity increases faster and you pay less interest over the course of the mortgage.  Your payment will be somewhat higher because you are paying your loan off over a shorter period of time.  Consider how the refinance fees will affect your mortgage balance before taking this step.  I don’t advise refinancing unless you expect to own the property for four more years.  

Let’s talk about building your equity faster!  Give me a call at 404-395-5588 or send me an email at Cheryl.Karr@ymail.com.  

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