Home Equity: Adding Value and Decreasing Debt

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In part one of this two-part blog series, we went over some basics on equity in your home, why it matters and how to build it. Home equity refers to the amount of ownership you’ve built up in your home over time through mortgage payments and other methods, and brings several potential benefits to homeowners.

At VIP Mortgage Inc., we’re happy to offer a wide range of home loan options that will not only allow you to purchase the home of your dreams, but also quickly begin building your equity and working toward homeownership. While part one of our series mostly defined what equity is and why it’s important, plus dug into the importance of simply keeping your home in building up equity, today’s part two will look at a few other specific strategies we often recommend to those who are targeting increased equity within their home.

Add Value to the Home

While keeping your home is the simplest way to build equity, this will happen faster and more consistently if you’re also working to add value to the home itself. There are a couple areas you should be thinking about here, including:

  • Maintenance: Standard maintenance of common areas, fixtures, appliances and other areas is important for any home. In any case where you consider selling or where home value and equity come up, the home’s long-term maintenance will play a role in its value.
  • Improvements: There are numerous home improvements you might consider, with the goal here being to not only upgrade important areas of the house, but also to target those that have the best return on investment. Bathrooms and kitchens are top sources here – updating fixtures or making these rooms more modern is a great ROI remodel. You may also consider others like adding or converting a room, finishing the basement, renovating floors or light fixtures, adding a patio, or even remodeling your landscaping. Others look to improve “curb appeal” areas that are valuable to prospective buyers, such as a new paint job on the home.

Reduce Debt

The other major piece of improving equity is limiting the debt you owe on your mortgage or line of credit for the home. This is really how you increase your ownership stake in the home, and therefore your equity. There are a few methods here for increasing equity:

  • Down payment: The larger your down payment to begin the process, the larger your equity is to start out with. In addition, those making down payments over 20% will not have to pay private mortgage insurance, freeing them up to pay more toward their principal and raise equity.
  • Payment amount or frequency: If you have the funds available, either increase your monthly payment amount or increase how often you pay your mortgage to build equity faster.
  • Refinance: Again if you have the funds available, you might consider switching from a 30-year loan to a 15-year option. This will make your payments larger, but will increase the speed with which you build equity and allow you to own the house outright far sooner.

For more on how to build equity in your home, or to learn about any of our mortgage rates or mortgage loan services, speak to the staff at VIP Mortgage Inc. today.

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