Real Estate Term of the Day: Equity

Real Estate Term of the Day: Equity

EQUITY – the value that the owner has in real estate over and above the liens or ENCUMBRANCES against it (Barron’s Dictionary of Real Estate Terms)

4 easy ways to increase the equity in your home:

  1. Maintain your home. It is very important that you keep up on the maintenance of the home & property that the home sits on.  Failure to not maintain the home results in DEFERRED MAINTENANCE which can cost you several thousands of dollars more if neglected too long.  Especially if you are thinking of selling your home, it is very important to ensure these items are taken care of so you aren’t punished on the sales price by the buyer.  A buyer can immediately detect pride of ownership with a well maintained home and are usually willing to pay extra knowing that the home has been properly maintained.
  2. Looks for ways to accelerate your mortgage. Consider setting up a biweekly loan/payment plan or making (1) extra mortgage payment every year (for example, the monthly payment on a $200,000 mortgage with a 30 year term at 6% would equal approximately $1199.10/month – not including taxes & insurance.  By requesting a biweekly mortgage you would save over $47,000 in interest payments and reduce the life of the loan by 5.17 years).  Check out my FREE mortgage loan acceleration spreadsheet to see how a biweekly loan or extra payments could cut down your mortgage lien amount.
  3. Don’t use your home as an ATM machine. Be careful not to use your current equity to leverage other purchases.  Home equity loans and HELOCs can be tempting to tap into, however, if the housing market experiences any sort of DEPRECIATION, you could be stuck owing more for the home/property than it is worth.  It is best to live within your means for a happy, stress free lifestyle!
  4. SWEAT EQUITY. Value added to a property due to improvements as a result of work performed personally by the owner (Barron’s Dictionary of Real Estate Terms).  Sweat equity is probably the most rewarding way to create equity as most find reward in seeing the ‘before’ and ‘after’ that home projects offer.  Remodeling, redecorating, landscaping, etc can be a great way to bring family members together while creating a place to call home.

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