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If you’re a newer homeowner, odds are you don’t really “own” your home outright. Rather, you likely have equity in your home.
In this article, we’re going to talk about what home equity is, how to use it to your advantage, and things you should avoid using your home equity toward.
What is home equity?
Unless you’re one of the lucky few who paid for their homes in cash, you probably took out a mortgage. As you pay off that mortgage you build equity.
Home equity is essentially the value of a property that a homeowner has at their disposal due to paying back part or all of their mortgage.
However, there’s another factor at play in home equity, and that’s market value.
Since the housing market fluctuates, the value of your home does as well, and as a result, your home equity changes with the market value of a house. That might sound worrying, but the good news is that due to something called appreciation.
In the same way that the cost of living tends to rise each year with inflation, so do housing prices. However, appreciation isn’t the only factor at play in the valuation of your house. As your home ages, it will likely need some renovations, which could decrease the home value.
Generally speaking, however, your equity achieves a net gain as you pay your mortgage and the value appreciates.
Now that we know why equity can be so beneficial as an asset, let’s talk about ways to build it.
The best way to build home equity is to repay your home loan. However, more than simply repaying, you’ll want to repay in the fewest number of years to avoid paying more in interest. The longer you take to pay your mortgage, the more interest accrues that could have been used toward other investments.
The second way to increase equity is one we mentioned before--market fluctuation--namely appreciation. To improve the chances of getting a high appraisal of your home, it’s important to keep up with maintenance and make smart renovation choices that will have a high return on investment.
Using home equity
The best use of home equity is to leave it be and increase its value over time. However, that isn’t always possible for all of us. Since many of us need to move before repaying our full mortgage, equity allows homebuyers to use their equity toward their next mortgage.
Another option is to take out a home equity loan or home equity line of credit. Ideally, you’ll only use these loans if you’re planning on using the loan money to increase the value of the home via home improvement projects.
Borrowing against your home equity does come with risks. Since you are putting your share of your home on the line, there is a chance of your home being foreclosed on if you don’t repay the home equity loan. However, lenders typically seek other methods of repayment or settlement before foreclosure.
285 Littleton Road, Westford, MA 01886
Selling a home can be pretty intense and stressful, especially if you haven't done so before. The pressure even becomes greater when you need to close your current sale before you move into a new home. Doing these few things may be the critical little steps you need to take to make that sale happen as fast as you need it.
- Price your home right Pricing is especially important. A lot of times people price their homes based on what they think they ought to get for the house, but a buyer is only going to pay what he thinks is the value of the house. Pricing right means that your home won't stay for too long on the market—a negative indicator that can slow the sale.
- Improve the curb appeal Curb appeal refers to how attractive your home looks to people on the outside. Little things like upgrading the exterior paint job, replacing the number plate, doorbell, and other external fittings or even mowing the lawn will all add up to make your house appeal to the buyer looking on from the outside.
- Take good pictures The old saying is true that goes that a picture is worth more than a thousand words it comes to your house listing. You want to make sure that you avoid unattractive photos. You could use a professional photographer to make sure that your pictures are high quality with adequate lighting. Unless your cell phone camera is super good, you probably shouldn't use it.
- Arrange your home right The right arrangement of your home might be what is needed to help your buyers make the final decision. Take away your personal touches and lay aside your preferences. The objective is to make it look like a home they can live in, and having too much of your personal items might be a distraction as it makes it harder for them to picture themselves living in a home that still has your pictures on the wall.
- Write out a great listing copy And while a picture may be worth a thousand words, a picture plus a thousand words, is worth a lot more. A vivid description makes potential buyer of your home have an idea of how living in your home may feel. You should talk about any advantages your neighborhood has, such as proximity to schools or shopping malls. Let the buyer think that your home is unique with your words. If you need assistance with a good description, talk to a professional writer for help.
285 Littleton Road, Westford, MA 01886
Navigating the home selling journey can be difficult, regardless of whether you're an experienced or first-time property seller. Fortunately, we're here to help you limit the possibility of encountering home selling problems that otherwise may prevent you from achieving your desired results.
Now, let's take a look at three tips to help you avoid risks during the home selling journey.
1. Learn About the Housing Market
What sets your residence apart from others on the real estate market? Ultimately, if you allocate time and resources to learn about the local real estate sector, you can promote your residence to the right groups of prospective buyers.
Take a look at the prices of homes that are similar to your own and are located in your city or town. With this real estate market information, you can narrow the price range for your residence.
Also, check out the prices of recently sold houses in your area and find out how long these homes were available before they were sold. This real estate market information will enable you to determine whether you're about to enter a buyer's or seller's market.
2. Establish an Aggressive Price for Your House
An aggressive initial home asking price can be a difference-maker during the home selling journey. Because if you have an aggressive asking price in place for your home, you could boost the likelihood of a fast house sale.
Conducting a home appraisal enables you to understand the value of your house based on its age, condition and the current state of the housing market. This appraisal is performed by a property expert, and it may help you establish an aggressive initial home asking price from day one of the home selling journey.
In addition, it may be beneficial to complete a home inspection. If a home inspector analyzes your residence both inside and out, he or she can help you identify potential problems. Then, you can perform various home upgrades to boost the value of your home.
3. Remain Flexible
The home selling journey typically varies from seller to seller. However, if you remain flexible as you proceed along this journey, you may be better equipped than other home sellers to identify and address problems before they escalate.
If you require extra assistance during the home selling journey, you may want to hire a real estate agent as well. This housing market professional can guide you along the home selling journey and take the guesswork out of listing your residence.
A real estate agent will help you add your residence to the housing market, promote your house to potential buyers and set up open house events and home showings. Plus, if you receive an offer to purchase your residence, a real estate agent will help you review this proposal and make an informed home selling decision.
Avoid problems throughout the home selling journey – use the aforementioned tips, and you can quickly detect and resolve any potential home selling issues.