Ten Ways to Increase the Equity in Your Home
Equity is defined as the value of the home minus the amount that owes on the property. When you are calculating the equity in your home it is important to include any amounts that are outstanding on the mortgage as well as the costs that would be associated with selling the home.
When you owe more on your home than your home is worth, it is referred to as negative equity. In the United States, ten percent of homes are in the current situation of facing negative equity. Negative equity exists when little or no down payment has been applied towards the home and the complete purchase price has been financed with the use of a mortgage. This number is increasing as the current state of the financial and economic markets remain uncertain.
There are ways to increase the equity in your home, which can hopefully increase the amount of home equity enough to bring your house from negative equity to positive equity. These methods are as follows:
1. Provide a higher down payment upon purchase of the home. A higher down payment can create a home that has instant equity. Therefore, if the homeowner decides to sell; the homeowner is not going to complete the sale owing money.
2. Making extra payments. Even if you can afford to make four extra mortgage payments per year towards the principal, this can go a great length to increasing the equity in your home.
3. Add surface to your home. When you add floor space to your home – the square footage is increased. Increasing square footage is a great way to up the purchase price of your home
4. Replace your appliances. Updated appliances including fridge, stove, dishwasher, washer and dryer have the ability to increase the value when these appliances are going to be included in the sale of the home.
5. Remodel the kitchen. Making simple upgrades such as ceramic tile and granite countertops can yield twice the initial investment when it comes time to sell the home.
6. Upgrade the bathroom. There is truth to the statement that kitchens and bathrooms sell homes. When you create upgrades in the bathroom such as glass tile and ceramics with luxurious appliances you can increase the value of your home greatly.
7. Reduce the term of your mortgage. When you reduce the term of your mortgage you can quicken the time that will pass before you are able to see equity within your home.
8. Finish unfinished spaces. Basements and attics that have been finished can contribute to the living space in the home. Finishing these areas can create extra rooms that will create equity while appealing to potential buyers.
9. Refinish the outside of the home and create curb appeal. Aspects of the home such as new windows, siding and even the front door can assist in upping the equity in your home.
10. Add amenities. Pools, saunas and hot tubs have been said to be hit and miss when it comes to increasing equity. The truth of the matter is however, homes with in ground pools sell more than homes without. You do the math and calculate the equity that can be earned in your home by the addition of a pool.
Using these methods, you can increase the equity in your home and crawl from the negative equity situation to creating equity in your home that you can use.