Home equity is the percentage of your home’s worth that you own, and it is essential for accumulating wealth through homeownership. The principal, or outstanding loan balance, decreases as you make mortgage payments. With that decrease, your equity increases. Once you have accumulated enough equity, you can access it when needed. Here are a few ways to build your Boston home’s equity.
1. Increase Your Down Payment
Your down payment is a part of the home’s value that must be paid upfront to make the purchase. The minimum down payment requirement varies depending on the mortgage type, ranging from 0% to 20%. Paying a higher down payment helps you increase your equity instantly. Since you are not borrowing any money from the bank when you make a down payment to purchase your house, the down payment will immediately add to your property’s equity.
2. Make Improvements
Home improvements and remodeling will add value to your Boston property and help you build equity quickly and effectively. You can improve the landscape of your house to enhance its curb appeal. You don’t always have to get a sophisticated lawn with expensive plants and fountains. A simple well-maintained lawn can add equity to your home. Adding another bedroom, updating lights, or making kitchen improvements will increase your house’s equity.
3. Pay More on Your Monthly Mortgage
Your equity stake rises as you pay off the mortgage. Though you will pay the interest and principal amount in a mortgage, the first payment will always focus on the interest instead of the principal. Use any extra money, including budget surpluses, bonuses, inheritances, tax refunds, and other windfalls, to pay down your principal balance more quickly. If you have the means to pay an extra little every month, ask your lender if there is a way to make these additional payments towards the principal amount.
4. Avoid Mortgage Insurance
Private Mortgage Insurance (PMI) is an added charge in your mortgage payment and is non-tax deductible. You must pay PMI each month and your mortgage payments when you make a down payment below 20%. Your PMIs will only get canceled when you own 22% of the equity. Try to put more than 20% down payment on your home to avoid paying PMI each month. Cutting off these PMIs can save you more money and help your home equity grow.
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