How to Build Equity in Your St. Louis Home
Owning St. Louis real estate can be a good investment. Even if you do not own property for investment purposes and just own your own St. Louis home, you can still use it as a tool to build wealth. And St. Louis Home equity is your key to doing that.
Here’s what you need to know.
What is home equity?
Home equity is a portion of your St. Louis house that you actually own. If you paid cash for your house, then you have 100% equity in the house, meaning you own the entire thing.
However, if you purchased your house with a mortgage, you don’t truly own your house. If you don’t pay your mortgage, your lender will repossess your St. Louis house. Your home equity is the percentage of the house that you do own.
Ways to build equity
- Make a big down payment
The size of the down payment that you make is that amount of equity that you will initially have in your St. Louis house. If you make it 20% down payment, you have 20% equity. The larger down payment you make, the more you own in your home and the better interest rate you are usually able to secure with your lender. A larger down payment also allows you to have a smaller monthly payment, or to pay a loan over a shorter span of time.
- Allow your St. Louis home to appreciate
Most real estate will appreciate over time. That means even if you are doing nothing active to improve the market value of your house, the value of your home is continuing to rise.
However, this is not usually a fast process unless you bought your house for far under the market value.
- Choose a 15-year mortgage
You will build equity much faster in your St. Louis house if you are paying your loan twice as fast. Choosing a 15-year mortgage over a 30-year mortgage might come with higher monthly payments, but it also allows you to build equity faster.
The trick here is making sure that you qualify for a 15-year mortgage and that you’re able to afford the payments once you do.
- Do some work around your house
A great way to build equity in your St. Louis house is to make improvements to it. When you update, upgrade, and remodel a St. Louis house, you are adding value to the home. As your value increases but your mortgage does not, you will have more equity in your home.
However, when doing this, it’s important to consider the expenses that you are investing in the house to make the improvements in the first place.
- Pay twice a month
Mortgages come with monthly mortgage payments. However, if you pay on your mortgage every two weeks instead of once a month, you will actually make an extra payment every year. This does not mean that you make 2 payments to your mortgage every month or the total of your monthly payment, it means that you split your monthly payment and then pay that amount every two weeks.
If you are interested in doing this, you need to check with your lender to make sure that they will not charge you an extra fee for processing more often. But this is a great way to pay your loan off 5 to 6 years early.
Building equity in your St. Louis home does not need to be difficult and it is beneficial. Once you have equity in your home, you can use that to take out a home equity line of credit if you need access to cash. The rates on home equity loans are generally less than credit cards or other forms of private loans because it is backed by your home.