Many homeowners look to their home as a means to increase their overall net worth. Here, we will discuss several techniques that homeowners can use.
Building equity in Oxford Real Estate with Capital
The initial equity in the home will come in the form of the down payment. Increasing the equity in the home will require additional monthly payments to the principle as well as property appreciation. From 2016-2017, property values showed an average appreciation of 1.6% or more. In this way, a home behaves much like a publicly traded stock or other commodity. However, if the homeowner possesses the property as personal residence for at least 2 years, capital gains is paid on a $250,000 gain for individuals or $500,000 for married couples.
Your monthly budget is the primary factor lenders consider when deciding whether you can afford a home. By making a larger down payment, you will lower the monthly payment though you will also decrease the benefit of building equity through appreciation. Of course, one can always make additional principle payments during the life of the loan too.
If interest rates fall, it may be wise to refinance your mortgage. There are several reason to refinance:
lower the monthly payments with a lower rate after having accumulated more equity
decrease the term of the mortgage (i.e. 15 year mortgage instead of a 30 year mortgage) to build equity quicker
rid mortgage insurance after the loan to value (LTV) of your property is less than 80%
Building equity in Oxford MS real estate by literally building
Home improvements can also be used to increase the value of the home. Study the market and uncover the characteristics that buyers are seeking. Make sure to avoid these common seller mistakes. Improvements to a kitchen, bathrooms, or bedrooms are generally safe investments.
Aside from using cash to pay for repairs and renovations, some homeowners elect to use a home equity line of credit (HELOC), home equity loan, or cash-out refinance. Before pursuing a leverage option, talk to your lender to determine the best approach for you.
Thanks to our friend Brian Carpenter at Kiamie Real Estate for this article!