Equity.

Some people like to talk about it as if it’s some mysterious, complex beast, but it’s actually very simple: Equity is just the difference between what you owe on your home and what it’s worth on the market. The more you have, the better off you are financially.

  • And increasing your equity isn’t just a great idea for the feeling of satisfaction you get, it also provides a resource you can draw upon with a home equity loan to upgrade your home, pay for a college tuition, and more.

Fortunately, you don’t have to be content with the passive increase in equity that occurs every time you make a mortgage payment. There are several ways you can take an active hand in increasing your equity. Here are six:

1. Bigger Down Payment

Putting 20% down may be the minimum for avoiding the additional cost of private mortgage insurance (PMI), but there’s nothing that says you have to stop there. Even an additional 1% can add hundreds or even thousands of dollars worth of equity right away.

2. Pay More Every Month

Your monthly mortgage payment is another minimum. And just as with your down payment, you can make a one-time or recurring monthly payment above what is required.

One popular method is adding an amount equal to one-twelfth of your monthly payment so that by the end of the year you’ll have made an additional payment. You can even formalize this method by opting for a bi-weekly payment schedule.

Just make sure the over-payment is applied to the principal and not the interest.

3. 15-year mortgage

A 15-year mortgage not only doubles the speed at which you acquire equity but also saves you money in the long run because loan rates are typically lower for 15-year loans vs. 30-year ones.

Obviously, your payment will be higher with a 15-year mortgage, but if you can swing it, this is an excellent method for quickly amassing significant amounts of equity.

4. Location. Location. Location.

This takes a bit of pre-planning, true, but just as home prices have historically continued to rise every year, some neighborhoods and cities are positioned to increase home values faster than others.

Do your research online and talk with a real estate professional to help zero in on the most promising locations to buy your home, and you may be able to benefit from faster-than-average appreciation which will likewise increase your equity.

5. Sweat equity

Great news: the majority of home improvement projects are relatively simple, low-cost, and easily do-able by the average DIY-er (meaning you). We’re talking repainting interior walls, replacing a front door, swapping old hedges for new flower beds, etc.

Even better, many of these smaller projects offer a better return-on-investment than larger projects.

6. Remodeling

If you’ve already done all you can on your own, but there’s more you’d like done (or need to do), then it’s time to call in the professionals and start looking to utilize a home equity loan or home equity line of credit (HELOC), such as the ones offered by Northpointe.

Updated kitchens, remodeled bathrooms, and “open floor plans” are just a few of the changes you can make to add value to your home.

Again, you’ll want to consult with a real estate professional to select the major upgrades that offer the most bang for the buck while also increasing how much you’ll enjoy living in your newly improved home.

Mind the Gap

Being proactive and increasing your home equity carries a lot of advantages, from helping to pay for any unexpected expenses life throws at you to strengthen your retirement savings, and more.

Want to know more about how to build up your equity and take advantage of one of Northpointe’s industry-leading home equity loan products?  Answer a few questions here, and a home lending expert will contact you.

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