A home is much more than just a place to hang your hat. A home should be a space that “sparks joy” (if you have not read The Japanese Art of Tidying Up, by Marie Kondo, I highly recommend!) and works for you financially by building equity. Recently, I helped a couple (25 years old) purchase a condo. Whether renting or owning, all the neighbors pay similar housing costs to be in a place they enjoy. A key acknowledgement they made was that as owners, their monthly payments are working for them, helping them gain financial stability at a very young age. Renters payments are going straight into a landlord’s pocket instead.
We all need a place to live and paying housing costs are inevitable. If you can qualify for a loan and put some money down, you might as well build equity and nurture quite possibly the largest financial asset available to you. As you pay your mortgage each month, the money you contribute towards principal is sort of a savings account. As you pay down principal, your equity grows and it can eventually become liquid cash that you can access for other purposes either by selling your home or borrowing against it.
Here are 5 smart ways to build equity and increase your wealth:
- Pay your monthly mortgage and then some if possible. If you can make extra payments (there are hardly ever penalties any more for doing so) you’ll obviously grow your equity even faster. Don’t let that 30—year amortization schedule scare you!!!
- Put more money down to begin with. The more money you put down on the front end, the more equity you have, right off the bat. It also helps you avoid things like Mortgage Insurance.
- Consider updates and improvements. Upgrading your home, such as your kitchen or bath can add value and boost equity. Some projects have higher dividends than others so just be careful. I publish a blog every year called “Bang for your Buck Improvements.” https://lindseyfriedmanhomes.com/2018/02/19/home-improving-bang-for-your-buck-remodeling-2018/ Look for 2019’s coming soon.
- Add curb appeal. According to Consumer Reports, sprucing up your curb appeal can boost your home’s value by about 3-5%. Trimming shrubs and bushes, painting your front and garage doors, creating an inviting front walk/porch with potted flowers, and power washing your siding are some low-cost ideas. They demonstrate that you have pride in your home.
- Shorten your loan term (this is not for everyone). If you choose a 15-year loan right off the bat or switch to one later, a shorter loan can help you gain equity much faster than the typical 30-year mortgage. Your monthly payments will be much higher so not everyone can afford or qualify for this move—it just depends upon your financial situation.
Homes are still appreciating in value in the Denver Metro area. Chances are you have built more equity in your home than you know. I see myself not only as a real estate professional but as a wealth management consultant when it comes to home equity. I provide my clients with frequent updates and market stats and advise them on how to make their equity work for them—whether it’s for home improvements or moves. Be in touch if you want to discuss!
