There are many advantages of owning your own home, and building up equity in the property is one of the main ones. What is equity, you may ask? Simply put, equity is the value of your property, less the outstanding balance of your mortgage. Anything that leads to an increase in the value of your home, or that reduces the outstanding balance of your mortgage, will increase the amount of equity you have in your property.
Here are some of the factors that will lead to a quick increase in your property’s equity:
Increase the Value of Your Property
The value of your property will rise because of a couple of things: through favourable changes in the property market, and by making improvements to your property. The first one of these is beyond your control, but you can use the second, making improvements to increase equity.
Property prices ebb and flow under market conditions, and no doubt your property value will do too. During downturns in the market, it is usually a case of sitting tight and waiting for the time when market conditions improve. Gaining equity through a value increase in your property takes time.
Making improvements to your property, however, is a different matter. Significant changes that add space or additional rooms to your property will increase its value significantly. Even small or cosmetic improvements to your property can also increase its value. New windows, rewiring, or even redecorating can all increase your property’s value.
If your primary goal for making the improvements is to increase your property’s value, you should do a bit of research before you start. First off, make sure that your planned improvements will increase your property’s value, as there could be a ceiling on property values in your area. The last thing you want is to invest cash in improvements that do not increase your property’s value.
As well as improving your property, it is also critical to conduct regular maintenance on it. A regular programme for maintaining your property, such as cleaning or clearing gutters, checking the central heating, and other preventive maintenance will help preserve your property’s value.
Reduce Your Mortgage
Reducing the outstanding balance on your mortgage is the other method of increasing the value of your property. Here are some things you can do to reduce this balance.
Putting down a large deposit when you first take out your mortgage will help you in a couple of ways. It will reduce the amount you need to borrow in the first place, thus giving you a more substantial chunk of equity in your property. Putting a 25% deposit down means you will immediately have 25% equity.
A larger deposit will also likely reduce the interest rate at which you borrow. This lower rate will further reduce your monthly repayments, meaning you can save a little extra to make over-payments on your mortgage. These over-payments will further increase the equity in your property.
As well as adding equity, over-payments will reduce the proportion of your mortgage repayment that is repaying interest. As interest is calculated on the amount of capital outstanding, reducing the capital amount will also reduce the interest.
When you first start repaying your mortgage, the most significant proportion goes on paying interest. As you repay, the interest portion decreases, and the capital portion increases. As the capital portion of your repayments increases, so does the equity in your property.
Adding any bonuses, windfalls, or other unexpected funds to your mortgage repayments will increase your property’s equity. Much better to be used in this way than on some frivolous expense or treat.
Quickly creating equity in your property takes work, but it is very much worth the effort. Equity in your property can provide you with a source of cash to be used in the short and long terms. So, the sooner you can build the equity up in your property, the better.
Hopefully, some of the information in this brief article will help you decide on the right strategy to quickly get equity in your property.