Home Equity Solutions

Home equity

When it comes to the subject of home equity many of us are at a lost of what it is, let alone how to figure it. But to put it in simple terms this is what it means. Home equity is the difference of what your home and property is currently worth and what you owe on it. Meaning if your home and property is currently worth $100,000 and you owe $75,000, your home equity is currently at $25,000.

How can you improve this figure. You could try these tips.

If you are just taking out the mortgage, you could pay a higher down payment.

You could pay more than your monthly mortgage payments each month

You could make extra payments

You could ask for a shorter payment term

You could make improvements to your home (this would increase the amount your home is worth).

Of course, you can only set the terms of the loan (mortgage) at the beginning of the loan term. After that you are stuck with the amount of payments you have to make. You also only have one shot at making that down payment.

As for those monthly payments, you can add to these as often as you can. You can even try to pay the loan off early (Just make sure you won't have to pay extra for early payment. This isn't always the case but some loans will penalize you for early pay off.)

That leaves you with the option of improving your home. If you make improvements to your home, your home, of course, will be worth more money. This means it will build its own equity.

But be warned some improvements have more value than other improvements does when it comes to building equity. Here is a brief listing of some improvements you may want to consider:

Remodeling your kitchen. This would entail adding new updated appliances, newer cabinets, a better floor, etc.

Remodeling your bathroom. This would entail adding a new tub/shower, new tile, a new sink, possibly new and improved storage cabinets.

Remodeling the outside of your home: painting, installing new gutters, Installing or revamping front steps, installing an awning (if necessary), restoring your decks or adding more decks, repairing or completely redoing the roof.

Remodeling the living room or family room: You could redo the flooring by switching from the common carpet to hardware floors. You could even install built in cabinets or bookcases.

The above remodeling ideas will add to your home's equity far more than some of the fun things you may wish to add such as a whirlpool or even a pool.

Of course, when you do the remodeling work, you should keep all receipts as proof. You should also hire only licensed and insured contractors.

Yet, keep in mind when you do the improvements to your home that the amount you spend will not totally equal the amount of equity you earn. For example, if you add $10,000 worth of improvements to your home, your equity will not automatically increase that amount. Other factors come into play such as: location of your home, the size of your home, the condition of the homes in your areas. Yet, other things also come into play such as interest rates, inflation and even supply and demand for homes in your area.

Finally, do remember that your home can appreciate some without you lifting a finger. This means the value of our home increases with any improvements being made. This has to do with local and state economy, house prices, inflation and interest rates. We have no control over this factor and it can't really be predicted.

Since we can't count on our home appreciating all on their own, the best route to building home equity is still by paying down that mortgage as quickly as we can and by making any improvements we can.

After the improvements are made, you may also want to increase the amount of coverage you have on your home insurance. Yes, you will probably be paying a higher amount for the coverage. But you will receive more if a tragedy should strike.

Owning a home is a big responsibility. Having a mortgage on it can be a scary experience. But by being responsible, making those monthly payments and making those improvements as we can, we are steadily still building on that wonderful home equity and maybe even slowly feeling better about the mortgage itself.