8 fast ways to build equity
Updated: May 20
The greater the equity that you have available to you as a home owner, the greater the opportunities that you have to build a property portfolio that can generate you wealth.
Home equity is the difference between the current market value of your property and how much you still owe on your mortgage. To us, as real estate investors, equity holds just as much value as gold! It can help real estate investors to unlock great potential.
In this article, we're going to explore how you can build equity faster. These eight strategies can be utilised to assist you with fast tracking your financial independence.
Put Down A Big Deposit
When buying an investment property and are in a position to put down a big deposit, we recommend doing so! If you can put down a 20% deposit or more towards a property, this can cut years off your mortgage repayments and put you in a better position to create wealth sooner!
Another advantage to paying a minimum of 20% as a deposit is that it means you avoid paying lenders mortgage insurance (LMI). LMI is an insurance you're required to pay to a lender if you're borrowing more than 80% towards the purchase of a property. It protects the lender from any risks associated with your mortgage loan. Lenders mortgage insurance is calculated on the size of your deposit and how much you're borrowing.
Purchase In An Area Forecasted For Capital Growth
Housing markets generally increase over time. The rate of growth can differ based on the location that you intend on buying an investment property. Therefore, it's important that when you're buying, you do your due diligence and research markets that are forecasted for capital growth.
Areas with capital growth can exponentially increase the value of your land. When this occurs; you get instant equity. If you're in need of assistance with locating regions earmarked for capital growth, REIF can help! Our expert team of property and finance specialists are monitoring area trends daily to identify this sort of information.
Get A Shorter Mortgage Loan Term
This strategy is great if you're in a position to do so. If you're a homeowner, you can talk to a finance specialist to source your a suitable mortgage product that can allow you to pay off your home loan in a shorter period of time.
So, instead of paying off your home loan in a standard 30 year term, you can pay it off in 20 years or less. The only thing that you will need to be aware of is that you'll most likely be required to make higher repayments than you would in a standard 30 year loan term.
Renovate Your House
If your home is becoming a little outdated or fittings are just not working anymore, renovating your home can add greater value to it. When adding value to your home through renovations, it's important not to spend more than what you can expect in returns, if you decide to sell.
Put More Down In Mortgage Repayments
A great way to fast-track your equity is by paying more in mortgage repayments for your investment property. If you wish to pay off your home loan sooner, it's important to see if your loan product allows for you to make more regular and frequent repayments. When you're in a fixed loan contract, it can become more difficult to make these sorts of repayments.
Put Tax Refunds Towards Mortgage Loan
At the end of each financial year when you get your annual tax refund, put this money straight towards your mortgage repayments. Just like we mentioned before, about making additional repayments, make sure that your home loan product allows for this, first.
This also goes for bonuses and cash gifts.
Utilise One Partners Income For Mortgage Repayments
If you're in a position to do so, sometimes utilising one partners sole income for mortgage repayments can help you build home equity sooner. This strategy is not for everyone. Therefore, it's imperative that all parties are in agreement for this to occur.
Chat To A Finance Specialist
Above all, if you want to implement strategies to support you on your pursuit to building home equity sooner, talk to a REIF finance specialist. Finance specialists can assist you on your journey to buying property and ensuring you're in an adequate financial position to build wealth for your financial future. They take a holistic, long-term approach to providing you with the best solutions possible.
Start a conversation today and book your free no-obligation finance consultation with our team of experts. We're always happy to help!
Ph: 1300 130 932
We explore this topic in our eBook 'Building Wealth Through Property.' Check it out here for FREE!