Building equity after you buy a home is an important part of being a homeowner. After all, you want to make sure that your home is a valuable investment in your future, not just a place to live. It's also important to build as much equity in your home as possible if you want to sell your home in the future. This will ensure you walk away from your home sale with a big check instead of owing your mortgage company money.
If you want to build equity in your home, here are four ways to do that:
1. Make a Mortgage Payment Every Two Weeks
If you make your mortgage payments every two weeks instead of just once a month, you will essentially make one extra mortgage payment a year. This can help you to pay down your house debt faster, which helps you to have more equity in your home. You can also pay above the minimum on your mortgage payments, too. Even $20.00 extra on every mortgage payment can help over the long term.
2. Focus on the Kitchen and Bathrooms
The kitchen and the bathrooms in your home are the biggest selling points you have. So, if you have $5,000 to spend, it might be wiser to spend it on kitchen upgrades instead of on outdoor landscape upgrades that might or might not last to the next year. If you know you can increase your home's value by adding on a bathroom, weigh the costs and benefits of adding one to your home. Speak to experienced Realtors and ask them what the best upgrades are for your type of home and your neighborhood.
You can also consult the 2016 Cost vs. Value Report, an extensive study conducted each year that shows you how much, on average, you can expect to recoup after completing certain remodeling projects. You can even break down the report further by finding out what upgrades bring the most value in your particular part of the country.
3. Purchase in a Growing Neighborhood
When purchasing a home, it's important to look at much more than just the home features or the colors of the walls. You need to do a very detailed assessment of the neighborhood and the history of housing prices in the area to see how much housing sales have improved in the past few years. You only want to purchase in neighborhoods that are growing and becoming more desirable.
4. Make Sure to Avoid Unnecessary Improvements
Some improvements might not affect the value of your home in a positive way. For example, some homeowners consider a pool a negative for a house whereas others consider it a huge draw. It's also important not to over-improve for your neighborhood. Sometimes high-end upgrades will not give you the return you want in middle class neighborhoods. So, when considering any home improvements, do your research and make sure that you won't actually hurt the value of your home when doing it.
Ultimately, there are many ways to build equity in your home, and as long as you put down a substantial down payment, make extra payments, and make smart upgrades, you will be well on your way to having a large amount of equity in your home.