Page 17 - Real Estate Now Jan-Feb 2022

But if you try to sell it, the car will be worth much less than when you bought it. However, when you purchase a home,
its value typically rises over time. So when you sell it, not only will you have grown your equity through your monthly
mortgage payments, but in most cases, your home’s market value will be higher than what you originally paid. And
even if you only put down 10% at the time of purchase—or pay off just a small portion of your mortgage—you get
to keep 100% of the property’s appreciated value. That’s the wealth-building power of real estate.
What can I do to grow my home’s equity faster?

Now that you understand the benefits of building equity,
you may wonder how you can speed up your rate of growth.
There are two basic ways to increase the equity in your home:

Pay down your mortgage.
We shared earlier that your home’s equity goes up as
your mortgage balance goes down. So paying down your
mortgage is one way to increase the equity in your home.

Some homeowners do this by adding a little extra to their
payment each month, making one additional mortgage
payment per year, or making a lump-sum payment when
extra money becomes available—like an annual bonus, gift,
or inheritance.
Before making any extra payments, however, be sure to check with your mortgage lender about the specific terms of
your loan. Some mortgages have prepayment penalties. And it’s important to ensure that if you do make additional
payments, the money will be applied to your loan principal.
Another option to pay off your mortgage faster is to decrease your amortization period. For example, if you can
afford the larger monthly payments, you might consider refinancing from a 30-year or 25-year mortgage to a 15-year
mortgage. Not only will you grow your home equity faster, but you could also save a bundle in interest over the life
of your loan.
Raise your home’s market value.
Boosting the market value of your property is another way to grow your home equity. While many factors that
contribute to your property’s appreciation are out of your control (e.g. demographic trends or the strength of the
economy) there are things you can do to increase what it’s worth.
For example, many homeowners enjoy do-it-yourself projects that can add value at a relatively low cost. Others
choose to invest in larger, strategic upgrades. Keep in mind, you won’t necessarily get back every dollar you invest
in your home. In fact, according to Remodeling Magazine’s latest Cost vs. Value Report, the remodeling project with
the highest return on investment is a garage door replacement, which costs about $3600 and is expected to recoup
97.5% at resale. In contrast, an upscale kitchen remodel—which can cost around $130,000—averages less than a 60%
return on investment.4

Of course, keeping up with routine maintenance is the most important thing you can do to protect your property’s
value. Neglecting to maintain your home’s structure and systems could have a negative impact on its value—therefore
reducing your home equity. So be sure to stay on top of recommended maintenance and repairs.

How do I access my home equity if I need it?
When you put your money into a checking or savings account, it’s easy to make a withdrawal when needed. However,
tapping into your home equity is a little more complicated.

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