Three Ways to Maximize Your Equity

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BY MAURICE ANDERSON

Your home will be your biggest investment. The higher the amount of equity you have in your property the easier to is to gain liquidity from your equity. Equity is the monetary value of a property beyond amounts owed on it in mortgages, claims or liens. It is the difference between your home’s value and how much you owe your mortgage lender. Over time the equity you have in your property gradually increases while the amount you owe your mortgage lender gradually decreases. Although your property value gradually increases over time there are many different factors in and out of your control that can affect the value such as economic circumstances. Equity can provide a comfy nest egg in the event of an emergency, help you take out a loan, line of credit or even help you put money towards another property by liquidating a portion of your asset. 

If your home is appreciating at a pace you are not satisfied with you can build equity in your property by paying down your mortgage at a faster pace. One extra payment a month, as little as two hundred dollars, can build towards lowering the amount you owe your lender and will help you pay off your mortgage years in advance, in turn saving you thousands of dollars on interest payments. If you are money conscious and would prefer to be cost effective while increasing your payments you can do so by using some of your tax refund, a work bonus or “partner money.” If you have ten individuals who want to save for a short period of time, partner money is an option and is usually done with friends, family or work colleagues and happens when everyone agrees to pay one hundred dollars (the amount you decide is up to you) out of each paycheck for a certain period of time. If you have ten participants the “partner” would last for ten weeks. If your mortgage is twelve hundred a month, divide this payment by twelve months and add this amount to each future mortgage. If your mortgage payment is twelve hundred dollars a month, you can make your normal payment and add an extra one hundred dollars principal payment each month.

Once you have more equity in your property you can now use some of the money to renovate your property. Renovating the kitchen is one of the best ways to increase your home’s value. When you are renovating your kitchen you work on updating your cabinet hardware, upgrading your countertop to granite or stone and last but not least by upgrading your kitchen appliances. Kitchen appliances can add a big impact in the value of your kitchen, which in turn will affect the price of your home. Make sure when you are choosing your appliances you measure the space it will be in that way you do not buy something that is too big and will take away more time and energy from your renovation by having to replace it.

If your kitchen is already updated another route to travel is renovating your basement. If you have a separate entrance it can provide you with a revolving cash flow if you find the right tenant and receive a reasonable amount for rent. Renovating your basement is the next best way to increase equity in your home and gain excess cash flow. The top income producing basement rentals allow the tenant to have access to everything a regular apartment would provide such as a full kitchen, one or more bedrooms, four-piece washroom and their own laundry instead of going to a coin operated laundry established. If you take responsibility and accountability for yourself you will develop a hunger to accomplish your dreams and learn different avenues with the tools you have around you to do so.

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