Buying a home is a dream come true for many people and the longer you live in it, the more opportunity you have to build equity. Equity is the difference between what the home’s market value is versus what you owe on it and with each house payment you make, the more equity you gain. Also as your home’s value starts to increase your equity also grows. If you’re looking for additional ways to improve equity in your home, here are a couple of ideas.
#1: Large down payment.
When you’re ready to buy a home, you can get a head start right at the get-go, by making a large down payment. Putting down 20% or more of the property’s value is a great way to not only add instant equity, but it can also keep your house payment lower and it will also allow you to avoid paying private mortgage insurance each month which doesn’t insure you but rather insures the lender against a possible loss.
#2: Shorter mortgage terms.
It’s very common for homeowners to take out 30-year loans on their home, but if you can swing refinancing your home to a 15-year mortgage, you will be able to pile on the equity and help pay off the loan quicker. Your monthly payments will be higher, but the payoff can be significant when your mortgage is paid off in half of the time. If you can’t swing the refinance to a 15-year mortgage, consider paying a little more on the principal of your loan with your payment each month or make one or two extra payments a year and apply it toward the principal. This can help you pay off the loan sooner and will help bolster equity over time.
#3: Home renovations.
There are some remodeling and home improvement projects that can help increase the value of your home and boost the equity. Replacing windows and doors, adding attic insulation, and completing a kitchen or bathroom remodel can all help with increased property value and greater home equity. There are certain home projects that do not add as much value. If you’re not sure, I’m glad to provide advice on which to-dos reap the most return.
If you’re ready to explore the option of buying or selling a home, contact me. I’ve been helping clients of all kinds for more than two decades. As a Realtor®, I can help you start the process and can provide tips along the way. I am glad to help you with the information you need to start your adventure.
When it comes to buying or selling a home, setting the right price from the get go is one of the most important steps. This requires a little bit of research as to what other homes are selling for in the area so you can judge what the value is of the home that you’re buying or selling. The market ultimately sets the value of a home. One of the best ways to compare your home to others in the area is to use a comparative market analysis (CMA).
What is a CMA?
A comparative market analysis is a report compiled by your Realtor® that provides a helpful evaluation of similar homes that have recently sold (called comparables) that are near a home that is intended to be sold or purchased. The report will give you information about homes that are similar to yours (in size, amenities, location, etc.) that are either currently for sale, have been recently sold, or those that were listed but expired or removed from the market. A good comparative market analysis will give you the following info:
-What homes like yours are currently selling for
-The amount of time it has taken them to sell
-What prices were in relation to initial list prices
Consider this scenario:
Here is an example of how a CMA can help a family that is looking to write an offer on a home that they want to purchase. The family wants to make an offer on a 4 bedroom, 3 bathroom home that is 2,000 square feet, located on a quiet street with a big yard, and listed at $300,000. The real estate agent that they are working with provides a comparative market analysis that looks at 3 other properties that have recently sold in the same area. The first is identical but it is located on a busy street and it sold for $274,000. The second property is similar, except offers more square footage, some small upgrades, and sold for $315,000. The other home is the same size but has one less bathroom and needs to be updated. It sold for $265,000. After analyzing these properties, the Realtor® determines that the listing price of $300,000 is fair and recommends that the family writes an offer that is close to asking price. The family purchases the home for $295,000. It’s important to note that an experienced Realtor ® knows what criteria to use in the CMA, taking into account what an appraiser will use for loan approval purposes (ie. comparables that have sold in the last 6 months).
Have more questions about how the CMA affects the value of your home or the home that you’re looking at buying? I’m glad to walk you through the process. Contact me today for details.
Blog Written by Brooke Strickland (brookestrickland.org)
Tips Provided by Nancy Johns