Mortgage Lender in Metro Detroit Gives Tips on Building Home Equity
Home equity is calculated by taking your home’s total value and subtracting money that you owe on the loan. You home equity will increase as you pay off your mortgage or if your home increases in value.
Unfortunately accessing home equity is not as simple as going to the bank and withdrawing money. However, you can get cash from home equity by refinancing your mortgage, taking out a second mortgage, or selling your home. You can also take out a home equity line of credit, but this home equity loan must be repaid.
As long as your home is increasing in value, you are more than likely accruing equity. You can speed up equity growth by paying down your mortgage principal and by taking steps to increase your property’s value, such as making home improvements. Keep reading for tips on how to build equity faster and get the most out of your property investment.
1. Increase Your Down Payment
There are several loan options available to Metro Detroiters today that do not require a 20 percent down payment. FHA, VA, MSHDA and other home buyer assistance programs are perfect for homeowners that do not have the funds available for a large down payment. In fact, even a conventional loan does not require 20 percent. However, if your goal is to gain equity as quickly as possible , you may want to consider a 20 percent down payment if financially feasible. Doing so will decrease the amount of principal owed, which means lower monthly payments, less interest, and increased equity. Buyers who can afford a 20 percent down payment will also avoid PMI fees.
2. Consider Shorter Mortgage Terms
30-year mortgage terms are popular among homeowners in Metro Detroit because monthly payments are lower than let’s say, a 15- year mortgage term. However, the longer your mortgage term is the more interest homeowners will pay over the lifetime of the loan. This means more money is being spent on interest when it could be applied to principal and increasing the equity of the home.
3. Pre-Pay Your Mortgage
If you or your spouse have been living in your home for awhile, it is possible that you may have an increase in income over time. Why not use that extra income to pay more than your required mortgage payment every month? Any extra money that exceeds your required monthly payment will reduce your mortgage principal, resulting in increased equity. Plus there is the added bonus of reducing debt and improving your credit.
4. Make Home Improvements
Not all remodeling projects will increase the value of your home dollar-for-dollar. For example, if you spend $10,000 on a kitchen remodel, this does not guarantee a $10,000 increase in home value. However, all home improvements will increase your property value to some level and will give your home more curb appeal if you do decide to sell. Plus, since you and your family will be able to enjoy these updates, it’s a good idea to make improvements as you go instead of waiting until right before you sell your home.
5. Get an Appraisal
Having an up to date appraisal of your home will allow you to better determine your home’s equity. There are many factors involved in determining property value such as the age, location, size and condition of your home. Not to mention, property values are always changing to reflect the current housing market. Consider having your home appraised to get an accurate valuation of your property. This is especially true if you have recently completed any remodeling projects.
Contact a Mortgage Lender in Metro Detroit for More Information
Whether you are looking to buy a new home, need help with refinancing or have more questions about home equity, it is best to consult with a mortgage expert. If you are looking for an experienced mortgage lender in Metro Detroit, Julie Krumholz has over 30 years in the Mortgage business and is ready to help you throughout every step through the home loan process.
Contact Julie Krumholz by Calling: 586-382-5482
Looking for more helpful tips ? Be sure to read our article: Tips for Michigan First Time Home Buyers
