Buying a home takes time and money. As an investment, you want your home to increase in value. That means building up your share of ownership in the home, aka "equity". Equity is the difference between the balance you owe on your house and the home's actual value. There are several ways you can start building equity in your Havasu home right away.
Building Equity in Your Havasu Home
Up the Down
Putting down a larger amount of money helps in many ways, including building equity. Financial experts suggest putting no less than 20% of the purchase price down when buying a home. If you're looking at a $250,000 house, that's $50,000. Not everyone can afford that. Many conventional loans allow you to put less. With an FHA, you might get by with as little as 3-3.5% ($7500-$8750 on a $250,000 purchase). When utilizing a VA loan, veterans aren't required to put any money down. However, that doesn't mean you can't put more down if possible. Bumping your down to 5-10% ($12,500-$25,000 for a $250,000 home) increases your equity right away. Before you do this, though, make sure you look at your entire financial situation to determine if this is the best place to put your money right now.
Pay Off Your Mortgage Sooner
Paying off your mortgage sooner goes a long way to building equity in your home quickly, too. Banks set up mortgage loans so that the majority of your initial payments get applied towards the interest. As time goes on, the balance shifts and more gets applied to your principal. If you pay off your mortgage sooner, you save interest and build equity at a much quicker pace.
How do you do this? When you receive a bonus, rebate or tax refund, send it to your lender separately from your monthly payment. Specify that this should be paid to principal only. Send an extra payment each year. Again, specify that the extra payment should be applied towards your principal only. Otherwise, the lender may distribute it like they normally would (part interest/part principal). If that's too much, budget a certain amount be sent in addition to your regular monthly payment each month.
You can also refinance your mortgage to a shorter term. Instead of a 30-year fixed rate loan, refinance it to a 15-year loan. This increases your monthly payment by quite a bit. But it saves you thousands of dollars in interest and builds equity twice as fast. However, look at your overall financial picture to determine if this is a feasible option before you commit.
Can't afford to put more down or pay off your mortgage sooner? Another way homeowners begin building equity is by making improvements to their property. That can mean anything from painting walls and replacing flooring to adding a large master suite or remodeling the kitchen. Even making your home's exterior more appealing helps. When you increase your Lake Havasu home's value, it increases your equity. Of course, you don't want to go overboard and remodel yourself out of the market. Stay true to what other homes in your neighborhood offer.