There are several benefits of homeownership. Among the primary ones is the chance of building equity. This denotes the difference between your home’s market value and what you owe your mortgage lender. People assume that when you buy a home, you automatically have equity.
Unfortunately, home equity is not easy. Several elements determine how much equity you will get in your home. With the right steps, you will build significant equity within a short period. Your first step will be picking Utah’s best mortgage lender.
This is because the terms the lender will offer have a significant influence on how fast you will build equity and how much you can get. The following are tidbits on the elements impacting your home’s equity.
Down Payment
This is your first determinant on how much equity you get in your home. The standard down payment requirement for conventional mortgages is 20% of the home’s value. This will give you approximately 20% home equity depending on your home’s fair market value.
While down payment assistance programs sound lucrative initially, they might not have as huge an impact on your home equity. It is thus advisable to save as much as you can towards your down payment if you want to get significant equity when you start your homeownership.
Monthly Repayments
You will need to make a particular repayment monthly towards your mortgage. There are different repayment options, but the common one is one where you repay your principal and the accrued interest. The amount you will pay towards the principal in your monthly repayment goes toward the building of your home’s equity.
If you want to build equity faster, you can increase your principal repayments. Some homeowners opt for the interest-only mortgage repayment option, but this robs them of the chance of building equity.
Home Improvements
Any element that boosts your home’s value also increases your equity. As such, home improvements are profitable and practical investments. You should invest in routine maintenance, additions, and renovations to make your home the best place to live in.
New fixtures, energy efficient appliances, and landscaping are some of the aspects that can build your equity while boosting your property’s value.
The Real Estate Market
The property market also influences the equity you will get in your home. High demand for houses and a low supply of the same will generally push the value of your home upwards and consequently your equity.
This is also the case when the mortgage rates are low and more people are buying homes, thus increasing the property prices. The reverse is unfortunately also true as you might lose your equity in a flash when the property market crashes. Improvements in your neighborhood, such as roads will also boost your home’s value and equity.
You have many reasons to pay attention to the above elements and build your home’s equity. More equity in your home means you can borrow a substantial amount in a second mortgage such as a home equity line of credit (HELOC) or home equity loan. This way, you are guaranteed of a place you can get quick cash for various issues that might come up.
