What is Equity? Before understanding how to build equity, you need to have a clear idea of what equity is. You can calculate equity with your home’s current value. Subtract the amount you owe on any liens or mortgages against it. These liens include all the home loans that you used to buy the property.
What is Equity?
Before understanding how to build equity, you need to have a clear idea of what equity is. You can calculate equity with your home’s current value. Subtract the amount you owe on any liens or mortgages against it. These liens include all the home loans that you used to buy the property. The difference you will get is the home equity.
You also need to know that your lender doesn’t owe any part of your house unless you have purchased a shared equity mortgage. In a shared equity mortgage, you own the property, but you use it as collateral for your debt or loan. This way, your lender secures your property’s interest by availing a lien against it.
How to Build Equity before Selling Your House in Phoenix?
Here are some methods that you can use to build home equity over time before selling it.
Make a Big Down Payment
If you pay a huge down payment, it can provide you significant equity. The bigger the down payment, the more home equity you can get. Apart from this, if a homeowner puts down around 20%, they can even avoid paying for the private mortgage insurance or PMI. But before doing this, you need to assess your financial goals and financial conditions to determine the right amount of money that you can put down.
Increase Value of Your House
You can increase your home equity by making small home improvements. Anything that can add value to your house can help you in this case.
The type of home improvement you can opt for and the money you can spend on the house depends on several factors. Do you want to build equity so that you can make money from the property? It’s vital that you don’t spend more money than you can recover after selling it; this is called overcapitalization.
You can add value to your house in several ways. Here are some common and simple changes and improvements you can make to sell your house in Arizona at a good value.
- Building additional storage, like built-in wardrobes
- Kitchen renovation
- Bathroom renovation
- Roof repairs or replacement
- Floor repairs or replacement
- Internal or external painting
Do Some Maintenance
If you are wondering how to build equity before selling your house in Phoenix, the best way to do that is regular maintenance of your property. Routine maintenance requires effort, money, and time. However, a property with leakage issues, broken pipes, peeling paint, etc., doesn’t seem to be an attractive house for potential buyers. If you avoid regular maintenance, such as fixing damaged roofing and leaks, your equity will get lower over time.
Choose a Shorter-Term Loan
Refinancing or choosing a shorter-term loan can help you increase home equity. In the case of 15-year mortgages, you get lower interest rates. Plus, a significant amount of your payments go towards the principal instead of interest. This way, you can get more home equity compared to the amount you get from the 30-year mortgage loan. But you also need to know that premiums are relatively higher in shorter-term loans. Thus, you need to consider your budget before opting for this method.
Make More Regular Repayments
You might be paying for mortgage repayments on a monthly basis. However, it’s best to choose fortnight repayments instead. The primary reason for doing that is if you pay more funds towards your loan, you will have to pay less interest on your entire loan. As the loan balance will constantly reduce, you will pay less total interest on your loan. If you are thinking of choosing this method, discuss with your lender whether they offer you this service.
Now, you know how to build equity before selling your home. By adding value to your house and ensuring regular payments, you can make a significant difference in your home equity in Phoenix. If you still have any concerns, you can contact any credible, experienced real estate wholesalers in Phoenix to help you throughout the process.