How Buying Your First Home Can Lead Build Home Equity
Hey there, future homeowner! Becoming the proud owner of your first home not only means settling into a community but also taking your first step toward building home equity. As you run the numbers on renting vs. buying, let's dive into how building home equity can turn your investment into an asset!
Home equity is the difference between your home's value and the remaining balance on a mortgage. Suppose in the future, your home is worth $250,000 and you have $150,000 left on your mortgage, your home equity would be $100,000. You can find your potential home equity with this simple equation:
As you pay off your mortgage and your home's value changes, your home equity will change as well. Once your mortgage is fully paid, you'll have 100% home equity.
Home equity is the portion of your home's value that you own outright. If you plan to make a $17,000 down payment, you would have $17,000 in home equity when you close on your mortgage. From there, your equity will grow over the life of your loan. Wondering if it's possible to increase your home equity? Absolutely! In fact, a CoreLogic report stated that homeowner equity increased by $1 trillion from the end of 2021 to the end of 2022. That could be you some day! Building substantial home equity takes time, so keep a long-term mindset.
Building home equity is a gradual process, but there are steps you can take to speed things up. Here are five approaches to consider as you house hunt:
You might wonder what the big deal is about home equity. We’ll tell you. The main reason is that home equity is a path to building wealth. Plus, if you plan on living in your first home for the foreseeable future, you could borrow against your home’s equity should you ever need to consolidate high-interest debt or cover unexpected expenses.
As you search for your first home, it is important to understand why home equity matters now so that you can set yourself up for success in the future. Talking to a mortgage professional can help you learn just how equity can benefit you.
When you’ve established yourself in your new home and work to build your home equity, it’s essential to protect your investment. Here are some ways to safeguard your home equity:
Building and maintaining home equity is a long-term commitment. By following these tips and strategies, you may be well on your way to turning your first home into a valuable asset. Remember to consult with mortgage and real estate professionals along the way to make the most of your investment.
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