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How to grow equity in your home

By <a target="_blank" href="http://plus.google.com/116424027031730000412?rel=author">Lauren Leisk</a>
Yahoo7 Moneyhound

Five easy ways to grow equity in your home.


Equity, put simply, is the difference between what you owe on your home loan and what the property is worth. For example, if you owe $350,0000 on a house worth $500,0000, your equity is $150,000.

It makes sense then the quicker you can increase the equity in your home, the better off you will be financially. With house price growth easing to more sustainable rates, we uncover some other methods to keep your equity accumulating at a more rapid rate. Take a look.

1. Put Down Your Maximum Deposit

To start the ball rolling nicely, put down as much as you can feasibly afford. A large healthy deposit of 15% or more can help you avoid costly lenders mortgage insurance, which immediately reduces the amount your interest is calculated on and subsequently increases the equity in your home.

Related: Six steps towards saving your first $100k

2. Do It Up

There is no need to go overboard here; be smart about it and talk to local real estate agents and builders about what could be the most cost effective way to increase the value in you property without overcapitalising, a common mistake. If you are a handy person, consider making changes as you save the money rather than borrowing more money to make renovations - as this can be a false economy in the wrong market. If you are doing any significant changes, be sure to go through the appropriate channels and get approval from the council and the corporate body.

3. Pay It Off

So market interest rates have come down... now is not the time to rest on your haunches and wait for it to fire back up again. Do some homework. Can you make more frequent repayments to pay your home loan off quicker? Do a budget. If you have surplus income that seems to be going on extravagant lunches and take away coffees, why not pour every spare cent into increased mortgage repayments while rates are low? Contact your financial institution and find out if there are any fees associated with these simple adjustments that can result in thousands of dollars of equity.

Related: Seven ways to take advantage of the rate cut

4. Choose The Loan That’s Right For You

Not all home loans are created equal. Just like you should have a regular health check with your G.P., so should you have a regular home loan check. Make sure you have the right home loan to suit your budget and lifestyle to begin with and re-asses every year as your circumstances change. Even if your circumstances stay the same, keep an eye on the home loan market, as it is an increasingly competitive area. It might cost you $1,000 to refinance now (change your home loan contract or provider) but this could save you up to $50,000 in the long term, so it's best take a close look at the home loan deal that you've got and compare it with other offers.

Related: What is refinancing? Pros and cons

5. Hold On To Your House

It stands to reason that the longer you hold on to your house the more you pay off your home loan and the more your property increases in value. This results in a massive increase in equity over the long term. Whilst short-term gains might be limited in the present economical climate, it is worth being aware of the fact that property tends to increase in value the longer you hold on to it.

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