Qualifying for a mortgage loan is a huge accomplishment. Although homeownership comes with additional responsibilities, there are benefits to owning your own property. Sure, you’re responsible for the maintenance and repairs on your property. But on the other hand, there’s the opportunity to build equity and increase your net worth.
Equity is the difference between your home’s value and what you owe a mortgage lender. As your home gradually increases in value, and as you pay down the mortgage loan, your equity increases. Unfortunately, equity builds at a very slow pace. It can take years to pay down a mortgage balance, and in a slow housing market, houses may appreciate at a slow rate. Despite these challenges, there are several ways to build equity faster.
For example, you can pay more toward your mortgage each month. Your lender will apply the extra money to your principal balance to get rid of the mortgage faster. Other options include a 15-year mortgage instead of a 30-year mortgage, as well as a biweekly mortgage. In both instances, you pay less interest which helps knock down the balance quicker.
Additionally, any project that improves your home can raise your property value. These can include a new kitchen or bathrooms, a room addition or finishing a basement. Other home projects, such as replacing the roof, building a new fence or installing new doors and windows can also increase your home’s value and raise your equity.
Having plenty of equity in your home is beneficial for several reasons. The less you owe on the mortgage loan, the more you’ll profit when you’re ready to sell home. This can translate into a larger down payment on your next home. But what if you have no intentions of selling your home? In this case, you can take advantage of other equity options.
Home Equity Loan
If you have a lot of equity, this opens the door to different financing and loan options. For example, you can apply for a home equity loan and use these funds for any purpose. With this type of loan, your equity works as collateral. This establishes a second mortgage or an additional lien on your property. You’re allowed to borrow a certain percentage of your home equity, and you can use this money for home improvements, debt consolidation, start up capital for a business, college expenses, etc. Be careful with a home equity loan. Defaulting on this loan can trigger a foreclosure.
If you’re over the age of 62 and have sufficient equity in your home, you may qualify for a reverse mortgage. Profiting from home equity typically involves selling the property. But if you want to stay in your home, a reverse mortgage lets you access this money. This is a loan against the value of the house, however, the loan isn’t due until you die or sell the home. You can learn more about reverse mortgages by visiting websites such as
Some people discount the value of buying a home. But why waste money on rent when you can build equity and increase your personal wealth? The more equity you have, the greater your options.