Medford, Oregon homeowners want to know, how do you build home equity?
We are honored to be one of the top mortgage lenders in Medford, Oregon. With over 33 years in the mortgage industry, we have become one of the most trusted names in the industry. But as a result, we get lots of members of our community who come to us with their tough questions about the home buying process! One of the things people have been asking us recently is the best ways to increase their home equity. So we’ve taken a moment to compile a short list of some of our best tips for increasing the equity in your home.
What are the advantages of owning your own home?
One of your most powerful assets is going to be your home equity. Home equity is the percentage of your home that you own. You can find out how much equity you have in your home by calculating how much still owe on your home mortgage subtracted from the market value of your home. For example, if your home is valued at $357,000 based on a competitive market analysis and you’ve paid your principal balance down to $300,000, that means you’ve accumulated $57,000 in home equity.
What are some ways I can build home equity?
1. Build home equity with a big down payment
Your down payment immediately determines how much equity you’ve initially investing into your home. A sizable down payment will not only decrease your monthly payments, but will determine what percentage of your home you own at closing. And if you can afford to put down a full 20% you will avoid paying for private mortgage insurance.
If you’re not sure how much you should invest in your down payment and how much money you should keep as cash reserves for financial emergencies, set up an appointment to sit down with James and create a plan that works best for your needs.
2. Increase the value of the property to build home equity
Making certain renovations and updates to your home can help increase the value of your home. But you should be careful where you invest into renovations, because not all home improvements increase the market value of your home. Take certain factors into consideration, like your area and what buyers in your community might be looking for in a home.
For instance, for a home renovation in Medford, you’re safe doing small improvements to your home like replacing your garage door or the siding on your home. But you may not get your investment back from adding a backyard pool.
3. Pay more than the monthly minimum payment
One thing many homeowners don’t know is that they can pay a little extra every month on their mortgage payment, which can help you pay down the principal balance of your home.But make sure you specify that the additional funds are to be applied toward the principal balance of your mortgage. This way you will be paying directly to your principal balance and not paying toward your interest.
4. Refinance with a shorter term loan
If you have a 30 year loan, you can always refinance and shorten the term of your loan! There are a few other options available, such as a 10 or 15 year loan. This can often decrease your interest rate, and equal smaller mortgage payments for you. This will help you build more home equity and pay off the balance of your loan much sooner.
If you’re interested in refinancing your home, reach out to us! We love helping home owners accomplish their home ownership goals by refinancing and building their home equity. We are happy to help you go over all your options and build a plan for your future.
5. Wait for your home value to increase organically
Local housing markets often fluctuate. We have seen a ton of change in our local market here in Medford, Oregon even in the last two years! However, home prices generally increase naturally over time. A good rule of thumb for building decent equity in your home, and a positive return on your investment, is to plan to stay in your home for at least 5 years.
We understand, not everyone can make a five year commitment to staying in one place. A great way to increase equity in your home, even if you are ready to upgrade or relocate, is to use your home as a rental property. We have helped countless home owners purchase second homes and continue investing in their future and their home equity by renting out their first home.
What are my next steps?
If you still have questions about building equity in your home, refinancing a mortgage, or investment and rental properties, reach out to us today! With three decades of experience handling mortgage loans in Southern Oregon we have helped thousands of homeowners make big strides toward accomplishing their home ownership dreams and making their financial goals! And we can help you, too!
Call us today to schedule an appointment at (541) 770-2727. We can’t wait to hear from you!