Build Home Equity Faster
Home equity is the part of your property you actually own. For instance, if your property’s worth $250,000, and you have a mortgage with a remaining loan balance of $100,000, your equity in the property is $150,000.
Naturally, building home equity comes at a price, usually in the form of larger payments. If building home equity means incurring debt to make ends meet, then you’ve defeated the purpose of building equity in the first place.
The first option in home equity building is to make additional principal payments. One way to do this is to sign up for a bi-weekly mortgage, in which you make two payments per month (which added together equal one monthly payment). You will make the equivalent of 13 monthly payments per year instead of 12, which may seem insignificant. But a 30-year loan with a bi-weekly payment plan is usually paid off in about 20 years.
The other way to build home equity faster is to refinance. If you have a $200,000 30-year Fixed rate loan at the current going rate of 3.375 percent you will pay $118,309 in interest over the life of the loan. If you replaced it with a 15-year fixed rate loan at the current going rate of 2.75 percent you will pay $44,304 over the life of the loan. Your monthly payment would go from $884.19 to $1357.24 for principal and interest. You would save $74,005 in interest and build the same amount of equity in half the time. Of course if the difference in interest rates between the 30-year and 15-year loan is more than 0.625% your savings will be even greater!
If you need help with amortization tables or calculating your savings, please call or email me!