When you buy a home, you are making an investment. The money you pay toward your mortgage principal becomes equity in your home and a great savings plan. There are benefits to growing your equity quickly. The more equity you have early on, the more time that equity has to grow in value over the years ahead. Plus, you can borrow against it if you need to. Following are some suggestions to help you build equity fast.
- Pay extra toward your mortgage when you can. Making extra payments toward your mortgage not only reduces your loan balance but reduces the interest you are charged. With a loan of $500,000 @ 6.5% your monthly 30yr payment is $3,160. If you increase your payment to $4,355 you pay your mortgage off in ½ the time. Only 15 years!! If you just round your payment up to $3,500 you reduce your loan by 7 years saving $236,000. Just make sure that if you do this, you write down that the payments you are making are toward the principal. If you do not specify you intend them to go toward the principal, they might go toward interest.
- Upgrade your home to increase its value. Another trick is to upgrade your home. By investing money in home improvements, you are increasing the home’s overall value. Improvements increase your quality of life and add equity. That gives the value of your home equity a boost. Some ideas would include adding a deck or patio, upgrading your kitchen or bathrooms, upgrading your heating system for efficiency and adding air conditioning, upgrading to more energy-efficient doors and windows, and installing solar panels. But those are just a few of the possibilities.
- Consider a shorter loan term. If you can afford higher monthly payments, it may also be worth it to choose a shorter loan term. You can do that from the start, or you can refinance to a shorter loan term later if it takes a while for you to be able to afford that. The advantage of shortening your loan term is that you will probably qualify for a lower interest rate compared to what you would with a longer loan term. The less money you have to pay toward interest, the easier it will be to afford to pay off the loan rapidly, building up equity quickly in your home.
Buying a Home in Washington State?
Contact us for a free pre-approval and loan estimate. During your consultation, we can help you to choose a mortgage product that will help you to achieve your financial goals. To get started now, please give us a call at (206) 352-6453. We can help you purchase a home or refinance and save with a great low rate. Check out our rates for yourself. https://www.bluesquaremortgage.com/rates/ See how much you can save.
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