Maximize Equity

+ Make Bi-Weekly Payments

Most mortgages are set up to be paid monthly, while many of us get paid at our jobs every two weeks. If you pay half your monthly mortgage every two weeks, you end up paying 26 half-payments per year instead of 24 – in essence, you pay an extra month’s mortgage every twelve months. On a typical thirty-year mortgage, this can mean paying tens of thousands of dollars less over the life of the loan. It can also shave five years or more off the length of the loan, making the home fully yours much sooner than it would otherwise be.

Regular payments are split between principal and interest. For the first decade or so of your mortgage, most of each payment goes towards interest. Paying even slightly ahead of what’s required means the extra money goes to the principal of your loan, giving those extra payments far more impact than might first be obvious.

It’s important to check with your lender and verify that this is how they’ll treat early or extra payments. Some lenders have begun attempting to take advantage of the growing popularity of this or similar methods by weaving language into the small print which offsets the value of early or extra payments. And there’s absolutely no reason to rely on a third party to make this happen. There’s nothing an outside service can do to help you maximize equity through paying down principal that you can’t do yourself with very little extra time and effort.

+ Make Extra Lump-Sum Payments

If you receive a larger-than-expected tax refund, or stimulus money, or inherit a modest sum from dearly departed Aunt Beulah, consider applying it towards the principal of your home loan. Just like in the case of bi-weekly or extra payments, verify with the lender how this money will be applied first.

In the typical mortgage, any extra payments go straight towards the principal. On a standard thirty-year home mortgage, even one with a fairly low interest rate, even a few thousand dollars in the first few years can mean exponential savings over the life of the loan. Plus, that unexpected money you apply towards the balance of your loan becomes immediate equity for down the road.

+ Add A Little To Each Payment

If you can’t pay bi-weekly and don’t expect to come into many lump sum windfalls anytime soon, consider something as basic as paying an extra $50 or $100 each month along with your required mortgage payment. There are numerous online mortgage calculators which will let you play with the numbers to see what this will do for you over time in terms of building owner's equity and reducing total interest paid and such.

The point is that you have options. Every little bit helps. And in the case of a home mortgage, every little bit extra helps far more than you’d think.

+ Home Improvements

The most obvious way to get home value up is to do repairs, renovations, or additions. Even relatively inexpensive endeavors like a good pressure washing or fresh paint can raise house property value instantly. Home improvements you do yourself are sometimes referred to as “sweat equity.” You’re primarily investing your own time and energy into things that increase your current home value. Even if you’re not particularly handy with advanced tools or major renovations, you can probably replace loose, rusty nails with newer. You can watch some YouTube videos for tips on refinishing that cracked, nasty bathtub or replacing that obsolete toilet.

You don’t even have to have an impressive toolbox to make sure your yard is mowed and your bushes trimmed. Figure out who you can call to haul off that rusty old swing set and either fix that old car out back or sell it for scrap metal. You may think that if you wanted to sell the home to someone as a “fixer-upper,” they’d be happy to do those things in exchange for a reduced price. That overlooks two important issues. First, we’re focused here on how to maximize equity – to improve house worth as financial leverage or security. That means now. Second, you’re cutting your potential buyer pool by more than half leaving work undone. The typical 21st century buyer doesn’t want to begin their life in their new home by fixing up your leftover damage.

+ Community Improvements

These are the things we all suspect we should be doing anyway. Go to those homeowners’ association meetings, or start them if they’re not already a thing. Look for practical, non-confrontational ways to improve the safety and aesthetics of your neighborhood. Sometimes just getting volunteers to mow public areas or pick up trash along the main roads once a month can make a huge difference in both average house market value and quality of life for you and your families. Communicate with local officials to make sure basic needs are taken care of – potholes, speed limit signs or speed bumps, maintenance of public areas, the right sort of attention from police and fire departments.

Get involved in your local public schools. Assist with tutoring, go to football games, or provide items for the drama club’s bake sale. Support local educators and your local libraries – even if your initial goal is to see that equity increase, chances are you’ll find it personally gratifying as well. Talk to other homeowners about putting together a crew to help elderly neighbors or anyone else not able to keep up their property as well as they’d like. Mow some lawns, do some basic maintenance, and share a group meal or two. There may even be a local church or other community organization willing to assist with the logistics.

One of the most overlooked ways to maximize equity is to make the area around the home a better place to live. It just so happens that getting involved in this way is good for you, your family, and your neighbors in many other ways as well.

+ Determining the Market Value of Home Improvements

If your primary purpose for repair or renovation is to maximize equity, it matters how much those improvements are going to cost you when compared to how much they’ll increase home resale value. If this is your central consideration, you really only need two pieces of information to make your decision. The first is an accurate idea of how much the repair or renovation will cost. (That’s between you and whatever local talent is available and willing.) The second is an accurate idea of what the work will do to maximize equity or improve home resale value.

As you probably know even the more accurate home value websites are really just running algorithms and doing fancy guesswork based on things like square footage, the age of the home, and the sales of “comparables” in the area – homes of similar size, age, and features which have sold in your neighborhood or similar neighborhoods in the previous year.

There’s nothing wrong with using these as starting points when you’re first considering buying, selling, or making changes to maximize equity. It’s quite a wonderful reality of the 21st century that you can pull up pretty much any property online to check house value estimations and get all sorts of other information about your friends, neighbors, or anyone else anonymously, and with just a few clicks. Some will even let you virtually “tour” the property inside!

But when you’re talking about the market value of home improvements or the most cost-effective ways to increase an owner's equity, you need more accurate home values than even the most adorable home value search sites can offer you. Even in the 21st century, obtaining the most accurate home value requires a certified appraiser touring the property – in person – and submitting a detailed report on every significant feature or issue.