Building equity in your home gives you a fantastic long-term asset. The more of the property you own, the more you are eligible to borrow using a home equity loan — and at a better interest rate.
Every time you make extra payments on your mortgage, you take a large stake in the ownership of your house. The capital you build when you pay off your mortgage can be used to secure an excellent equity line of credit when you need cash. You can use this cash to upgrade or remodel your house. This will increase its value on the housing market when you sell the property, earning you more money in the long run.
What Is a Home Equity Loan?
A home equity loan is a loan you take out against the part of your property that you are the full owner of. This means the value of the property that isn’t owned by your mortgage provider. For example, if:
• Your house is worth $300,000
• Your deposit was $50,000 and the mortgage secured the further $250,000
• You’ve paid off $100,000 of mortgage
Then you’re in ownership of $150,000 worth of the property: this is the equity in your home that you own. You can use this to secure a home equity loan that provides a strong equity line of credit for big spending projects.
Of course, the more you’ve added to your home since you first got your mortgage, the greater the value of the property. So if you’ve conducted $50,000 worth of home improvements, such as adding a new roof or a conservatory, then you have $200,000 worth of property to secure a home equity loan. The more you own, the better the interest rate you’ll likely have access to on a home equity loan. Also, your property will be worth much more when you put it on the housing markets.
The Best Ways to Build Home Equity
So, how do home improvement loans work? First, you need to choose a project you want to finance. A great place to start is future improvements to your property. You can build equity in your home by increasing its value, which in turn allows you to secure a better interest rate on future loans.
This allows you to build a strong, constant equity line of credit that constantly increases your equity in your home. Below we’ve detailed some examples of improvement projects that work brilliantly for this process.
Replacement Windows Financing
A great way to increase the value of your property is to upgrade its windows. Drafty windows with poor locking mechanisms stand out like a sore thumb to potential buyers or the surveyors who value your home. These may seem like small details but can easily take a lot away from the value of your property in terms of the security and comfort it is judged to offer.
Accessing comfort window financing can help you build equity by significantly increasing the value of your property. Using a home improvement loan to finance this will allow you to secure a better interest rate for future projects — and also make your house a more comfortable place to live.
Help Paying for a New Roof
A new roof can dramatically increase the value of a property. This is especially true if it’s a high-quality roof with a long lifespan, such as a metal roof made from a material like copper. However, these roofs are expensive, and you’ll likely need to use a home improvement loan for help paying for a new roof.
By using the equity you already own in your property to secure this loan, you can get a great interest rate and finance an investment that will see the value of your property increase massively. Remember: the equity from these improvements belongs to you, rather than your mortgage provider. You can use this equity to fund further improvements to your property and get ahead in the housing markets.
Alternatively, you can use the cash to pay off your mortgage even faster, further increasing the stake you own in the property.
Let Homeowner Funding Help with Your Home Improvement
Whatever project you decide to use to help you build equity in your home, you need support from a trusted home improvement loan provider. After all, building equity in your home starts and ends with remodels and updates. Homeowner Funding can help with that. Contact us today to learn more.