As home values increase, homeowners are the most benefited in the situation. In the last five years, homeowners who have been in the same home may have accrued much more wealth than they are aware of.
Research has discovered that the real estate market is being supported by a large number of homeowners gaining around 49% in home price appreciation since July 2019. In the last five years, the average American homeowner has increased their home equity by an average of $140,900. This is research from the National Association of Realtors.
If you are considering purchasing a Philadelphia home or you already have a Philadelphia home, you may consistently ask yourself how you can continue to grow the equity in your home and how you can grow your wealth portfolio.
How Can You Build Equity in Your Philadelphia Home?
What is equity?
In order to understand how to grow the equity in your home, understanding exactly what it is is important. Home equity is the difference between the current market value of your home and what you currently owe to pay off the mortgage on your property. For example, if you have a home worth $700,000 and your mortgage payoff balance is $400,000. You have $300,000 of equity. As your property value increases, your amount of equity also increases.
Equity is not static. It is constantly shifting. If your home value decreases, your equity will decrease. This is why many people are concerned about the possibility of a real estate market crash, as the last one happened not too long ago in 2008. A homeowner always wants to build equity so they can build their wealth. A decrease in home value means a decrease in equity. Fortunately, the real estate market is continuing to show strong growth even as inventory increases.
Great strategies to build equity
Most of the equity in your home is determined by the fair market value of your home. The biggest determining factor of the fair market value of your home is the current real estate market in the area where you live. However, there are some attributes about your home that can command a higher price and help your home to hold a higher value. These are strategies that homeowners can utilize in their homes.
Making home improvements– some renovations can greatly increase a home’s value. It is a good idea to make thoughtful improvements to your home that will increase the usability and lifetime of crucial systems in the home. Some cosmetic changes can also increase the value of your home, especially if you are updating very old areas of your home. Kitchen, remodels, and bathroom remodels give the biggest return on investment when it comes to cosmetic upgrades.
Staying in a home longer– the longer you stay in a home, the more equity you are able to build in a home. The average annual value appreciation on homeownership is around 3% per year. This, of course, is when real estate market factors are in a positive or healthy trajectory.
Making extra mortgage payments– another way to increase the equity in your home is to decrease the amount of money you owe on your home. Some homeowners choose a strategy of making an extra house payment every month or putting at least an extra half payment or a quarter payment on their home every month. If you are able to do this, it is a great way to increase your equity while also decreasing your interest on your home, as the interest is calculated on the principal balance of your mortgage loan. Just make sure to communicate that the extra money is to be put toward the principal balance of the loan.
Increasing home equity can help you if you plan to sell your home in the future to make a higher profit off the sale of your home. Additionally, it can help you to secure more favorable loan terms when you apply for other types of loans, such as home renovation loans or even car loans. Building your wealth portfolio is always beneficial.
Selling a home is a large job, but it can be made a lot easier with the help of an experienced real estate agent. Don’t just hire any agent to sell your Philadelphia home; hire an agent from Victory Real Estate and get the best care possible to get your home sold successfully.
“Leron is by far the best realtor I had ever worked with, he is very experienced, knowledgeable, and a true professional, he did great from the minute he listed two of my properties all the way thru the closings. If you want to buy or sell or manage your properties talk to Leron and it will be done in the most professional manner.” Victory Real Estate review.