How to Build Equity in Your West Chester or Liberty Township Home
One of the biggest benefits to buying a West Chester or Liberty Township home for sale is the opportunity to build equity. You’ve probably heard of the concept, “building equity,” but what does that really mean? And why should you want it?
In the simplest terms, equity is the difference between how much your West Chester or Liberty Township home is worth and how much you owe on your mortgage.
If you paid cash for your home, you’d have 100% equity in it.
If you put down 10% when buying your West Chester or Liberty Township home, that’s how much equity you have in the property. So, let’s say you bought a home for $300,000 and put down 10%. You’d have a mortgage balance of $270,000 and equity worth $30,000.
As you continue to pay down the mortgage, you continue to build equity. Eventually, you can draw on that equity to pay off debt, to pay for college, for retirement, or other major expenses. The more equity you have, the easier it is to refinance and take cash out or to take out a home equity line of credit. Your equity is almost like another bank account.
No wonder people love homeownership!
A lot of people often ask us, how can I build MORE equity in my West Chester or Liberty Township home? Here are three options to consider.
First, when you’re shopping around for West Chester and Liberty Township homes for sale, consider looking at homes that allow you to make a larger down payment.
If you haven’t bought a home yet, the easiest way to get more equity is to put more money down. And depending on the mortgage loan you choose, this could also lower your monthly payment or eliminate the need for private mortgage insurance, making your home more affordable. Any cost savings can be used to pay down additional principle on your mortgage each month, which helps you build equity faster.
Second, consider upgrading or renovating your home.
Anything that increases the value of your West Chester or Liberty Township home also increases your equity – and the amount you stand to gain when you sell. Just be sure to choose your renovations carefully, as some offer higher returns than others.
Finally, pay down your mortgage faster.
We alluded to this above already. The lower your mortgage balance, the more equity you have, so work on paying down that loan sooner rather than later. Some people opt to make an extra mortgage payment each year, others set aside a few extra hundred dollars each month to put toward each mortgage payment. Another strategy is to make individual, lump sum payments when you have a bit of extra cash laying around (from a bonus at work, tax returns or otherwise).
Already have a good amount of equity in your West Chester or Liberty Township home and want to put it to use? Give us a call today! We’d be happy to chat about your options and discuss strategies for putting your equity to work for you to increase your income. (Hint hint: we love investment properties!)