The Commonwealth Blog

Wednesday, July 17, 2019

Build Equity Like A Pro

If you’re a Bostonian homeowner who’s interested in building home equity, focus on these two things: paying down your principal faster and making the right renovations. With a little bit of planning and hard work, you’ll increase your home’s value and grow your net worth.

Pay Down Your Principal Faster

Your principal is the amount of money you borrowed to purchase your home, which you have to pay back with interest charged by a lender. The faster you pay off your principal, the less interest you’ll accrue and the more your home equity increases. The following strategies will help you reduce your principal more quickly.

Prioritize Larger Payments

When possible, add more money to your monthly mortgage payments to decrease the lifetime of your loan. If you can’t afford to increase your payments every month, do so when you receive extra cash from tax refunds, bonuses, or an inheritance.

Pay Biweekly

Instead of making payments once a month, make them biweekly to pay down your mortgage fast. First, make sure your lender accepts biweekly payments and won’t charge you a fee for changing your payment plan. Also, confirm that your lender will immediately apply each payment to the principal instead of waiting to submit multiple payments at once.

Refinance Your Home

Refinancing with a shorter loan option gets you a lower rate—just make sure you can drop your interest rate by at least 1.5%. You’ll also want to consider closing costs and double-check that you won’t be penalized for making prepayments on your mortgage.

Increase Market Value Through Renovations

Part of being a smart homeowner is knowing what kinds of renovations will get you more bang for your buck. Whether you’re remodeling a Cape Cod vacation cottage or redesigning a colonial home in traditional fashion, it’s a good idea to consult reputable architects and designers and focus on making improvements that are currently in demand.

Curb Appeal

If your home’s interior looks great but your front yard is in shambles, you’ll be hard-pressed to find a willing buyer. Invest in landscaping to make the front of your home more attractive and welcoming. After all, the front yard is the first thing prospective buyers will see before entering your home—make sure they’ll actually want to step inside!

Energy Efficiency

Energy-efficient windows not only look nice and clean, but they decrease monthly utility bills too. Installing energy-efficient windows and appliances will save you in the long run.

Kitchen Remodel

Kitchen remodels are usually a must for buyers with families—or those who just love to cook. While lavish renovations can cost upwards of $100,000, more modest ones can still produce great results for about half the cost. Visit local department stores for help remodeling your kitchen without breaking the bank.

Invest Wisely

With some research and planning, you’ll be well on your way to building equity like a pro. By paying down your principal more aggressively and investing in your home’s infrastructure, you’ll set yourself up for increased profits at the time of sale.

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