When you want to build equity early, there are some relatively easy things you can do. Alone, they won't add much, but together, you have a solid and reliable strategy where each individual tactic contributes. From bi-weekly mortgage payments to removing PMI, here are some tips.
Make Extra Payments when Possible
Making extra payments is an obvious way to reduce the overall time it takes to repay a mortgage. Of course, no one is suggesting you use all you have to repay. However, there are some easy ways you can increase your payments a little to reduce the time taken. For example, rounding up your payment to the nearest hundred. With shared ownership staircasing, you can use windfalls such as work bonuses to buy extra shares in your property each time.
Consider a Bi-Weekly Mortgage Schedule
Most people choose to pay their mortgage each month, and that's pretty much how everyone expects it. However, there is a little trick you can try to pay a little more that adds up and shortens the overall repayment period. Paying bi-weekly (every two weeks) is the same as making 26 half-payments. So why is this an advantage? This equates to 13 full payments over the year, meaning you actually make 13 payments instead of the standard 12 during the period.
Build Equity Early with High ROI Improvements
There are some home improvement projects that are always worth carrying out to keep a home's equity high. For instance, kitchen and bathroom renovations can add up to 25% onto the property value. There are also many home exterior upgrades that are worth your time and money that buyers will see and make decisions on because they add so much value. These include practical and functional parts of a modern home, such as the roofing and HVAC.
Remove Private Mortgage Insurance
Private mortgage insurance (PMI) is placed on your home if you bought it with less than a 20% downpayment. While there are laws in some countries that instruct the automatic removal of PMI after 22% equity, you can remove it manually to free up funds. It is a safety net to have PMI in place under 20%, but there is no reason you can't request its removal below that. With no PMI to pay each month, you can allocate the freed-up funds to mortgage repayments.
Review the Mortgage Structure Now and Then
Building equity isn't typically done quickly, and it's a slow and steady process. However, there are some tactics that can accelerate equity growth on a property. If you are earning more money or if interest rates are lower, you can use some methods to speed up equity building. For example, you can negotiate the terms of the mortgage by half, vastly speeding up the repayments. Or you can secure lower interest rates if the loan-to-value ratio is better.
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