5 ways to turn real estate into liquid assets and increase your home equity

Homeowners must have often heard people say that “home equity is useful.” But what exactly is home equity? How can it be used?

For example, if your house is worth $300,000 (market value), but you have a $200,000 loan outstanding, then your home equity is $100,000. If local house prices go up, your equity will also go up! This part of the funds can be withdrawn through a home equity loan or home equity line of credit (HELOC) to renovate the house or invest in a second home~

Many of the terms and fees of a Home Equity Loan are set by the lender, so it’s best to research these details before you make any agreements. Some fees can even be open to negotiation. The free analysis tool below allows you to select Home Equity Loan companies recommended in the state where you live. The interest rates and fees given by each company will vary depending on the loan amount and loan method. If you want to save some money here, it’s definitely worth shopping around.

8 ways to increase your home equity

1. Pay more for the down payment when buying a house

It is usually recommended to pay a 20% down payment when buying a home so that you don’t have to pay expensive private mortgage insurance (PMI). But some mortgage lenders may allow you to buy a home with only a 5% down payment or a 10% conventional loan. However, the less you pay down, the less home equity you will have at the beginning.

2. Pay off your mortgage faster

Once you sign a mortgage, you’ll have a fixed monthly payment each month, but that doesn’t mean you can’t pay a little more each month. If you’re able to put extra money toward your mortgage each month, or put a lump sum toward your mortgage when you get extra cash (like when you get a tax refund or a bonus at work), you can reduce the principal on your loan. The result? Giving you more equity. Be aware, however, that you may face prepayment penalties for paying off your loan early, and each lender has different requirements for what the penalties are.

In addition to paying a little more each month, you can also consider switching to biweekly payments. Biweekly payments are actually splitting the original monthly payment into two payments. At first glance, you may think that you will still pay the same amount after a year, but in fact, if you choose biweekly payments, you will pay one month more than the normal monthly payment at the end of the year!