Equity is a major advantage of homeownership, but it isn’t always as easy to build as you’d like. While equity can be a great financial asset, it could also become a source of frustration as you make routine payments but realize the housing market is not doing your property value any favors. Building equity ensures your own financial security, and it makes your property investment more worthwhile.
Falling house prices can also reduce your equity, even if you’ve done everything right. For this reason, it’s good to have a backup plan and know different methods you can use to build equity on your home. This can offset the potential losses brought on by an unstable or falling market and give you greater control over your financing opportunities.
Invest More in Your Mortgage
You can either increase your monthly payments or make additional ones to pay off more of your house faster. Your goal is to lower the principal owed amount to gain ownership of as much of your property as possible. Anywhere between 15 to 25 percent is typically good enough to qualify for a home equity loan or line of credit, but having even more will give you access to more funds.
These additional contributions do not have to be substantial to make a difference. An extra $100 here and there can get you closer toward a greater balance between what you own and how much you owe. Keep in mind that you may not have to take out a large loan if you only want a safety net of extra funds. If you have an expense to pay for immediately, a home equity line of credit (HELOC) can help you access the funds you need to cover the cost. Check out this guide to learn everything you need to know about applying for a HELOC.
Home improvements make your house more enjoyable to live in while also increasing your property value. The trick is to make sure when you plan to renovate you invest in projects that are always considered valuable rather than niche luxury upgrades. The most profitable home improvement projects are kitchen and bathroom remodels, deck additions and energy-efficient upgrades.
Because your goal is to build equity, you should focus more on upgrades that increase your overall value rather than add a wow factor. Certain splurges are great for your personal enjoyment, but they may not carry enough weight to tip the scales of property value in your favor. Some people use their HELOC to upgrade their properties. This can be beneficial if you know you’ll earn back what you’ve spent over time.
Take on a Side Gig
Part-time jobs, online businesses and means of passive income can give you an easy way to pay off more of your home quickly. You might start a blog and use affiliate links, walk dogs, deliver groceries or sell handmade items on Etsy. There are plenty of options out there, and they can actually be a fun way to indulge your interests or hobbies and earn money to boot. You don’t have to work yourself ragged to earn thousands a month. Even several hundred can be useful, especially if you take out a loan and use your side gig money to make the monthly payments.