Focus 5: Five Ways to Build Equity Through Real Estate
This week Erik & Randal give some quick tips to build equity fast through real estate.
Randal: Welcome back to Stay Focused, Focus Real Estate's weekly video blog. I'm Randal.
Erik: I'm Erik.
Randal: And today we're here to talk about five ways to build equity in real estate.
Erik: Our monthly Focus 5. Five ways to build equity in real estate.
Randal: We'd do six but we only have five fingers. I guess if we're going to talk about the equity you have in your home, the first I've got to do is define it. So Erik, what is home equity?
Erik: Well, that's a good question! Basically, equity is the difference between the amount of money you owe on your property and its current value.
Randal: Okay. Fair enough. So if you make a larger down payment is that a good way to increase equity?
Erik: That's one of our ways to increase Make a larger down payment so you'll owe less on the property and its value is there but you owe less.
Randal: Well, another thing we're also seeing is a second way to do this is cut your loan terms down. The typical mortgage is 30 years, but we're actually starting to see with the rising interest rates people cutting their mortgages into 20 and 15 years. And it's a double bonus! There are two reasons why that's awesome. First, you usually get a lower percentage interest rate. And then second, you were actually making larger principal payments every month.
Erik: You're building your equity faster because you're paying down your loan faster.
Randal: So that first couple talked about making your purchase and your doing that. If you're already in a home you've been at home, for five, ten, twenty, or whatever, and you still have a mortgage another way you can add equity to your home is by just making an extra payment a year.
Erik: Yes, one extra payment a year on a 30-year loan, you'll reduce that loan to 23 years. You'll knock seven years off that loan.
Randal: And don't forget when you're looking at your payment every month, most payments also include escrow for taxes and insurance. You don't have to make that. Just the principal and interest.
Erik: Another way to build equity, we've talked about this in previous videos is home improvements. And certainly, there are some home improvements have a bigger return on investment and increase the value of your home.
Randal: Don't worry there won't be a quiz but yes you could certainly make some improvements to your property and make it, you know, we've always said "sexy sells" Make your home sexier and it'll be worth more money.
Erik: The last, number five of our focus five, is leveraging up.
Randal: Taking the equity that you have in your current property, perhaps you have a good amount home equity line of credit and make a purchase of another property. Basically, what you have then are two properties that are increasing in value with the rate of inflation in the economy.
Erik: You're using your current home and the equity you have to leverage into another one.
Randal: So both of those properties are growing at the same time through the market.
Erik: Doubling your equity. We hope you found this helpful and informative. If you have any questions on any of this or you'd like us to help you figure out how you can build equity in your house...
Randal: ...or you need a good mortgage broker...
Erik: ...drop us a line comment below, glad to help ya out!
Randal: And don't forget to Like us on Facebook everybody and subscribe to our YouTube channel and until next time Stay Tuned and Stay Focused.