Our Blog
March 04, 2019

Your Sioux Falls home is a major investment and you obviously want to get maximum value and profit out of the equation.  The good news is, there are plenty of effective ways to build equity in your property.  Here are just a few that will help you to increase equity in both the short- and long-term.

Put at Least 20% Down

A larger down payment reduces the amount you’ll ultimately have to take out for a home mortgage loan, which will reduce monthly payments, but also leave you with extra money to pay toward the principle each month (reducing the life of the loan and helping to build equity more quickly).  At the very least, you should always try to offer a down payment of 20% at minimum.

Lenders will require you to pay mortgage insurance for anything less than this amount of down payment, and this is just extra money out of your pocket that could be going toward paying down your loan or upgrading your home to create additional value.

Pay Extra on the Principle

Your monthly mortgage payments include both principle and interest calculations.  In the beginning, you’re generally paying a lot more toward the interest.  If you want to build equity faster, start tacking on additional payment toward the principle each month.  This will increase equity and it could reduce the life of your loan (and the amount you ultimately pay in interest).

Refinance to a Lower Interest Rate

Not all of us have top tier credit when we buy a home, and in some cases, we elect to buy when interest rates are high in general.  Both of these things can increase payments and impact your ability to build equity expediently.  What can you do to improve the situation?

Start by working to improve credit, so that when you decide to refinance, you’re eligible for the best interest rates.  Then wait for market cycles to result in lower prime and mortgage rates so you can refinance, lower payments, and put more toward the principle each month.

Shorten your Mortgage Term

If you want to pay your mortgage down more quickly and build equity at the same time, a shorter term for repayment can do the trick.  Switching from a 30-year mortgage to 20-year or even 15-year terms will mean higher payments, but reduce the overall interest you pay and increase your equity much more quickly.

Consider Upgrades

Certain upgrades like the kitchen or master bath tend to improve your home value immensely, show significant return on investment, and increase equity immediately.  You just have to be careful not to overspend and cancel out added value.

Stick with It

The real estate market fluctuates, and if you can ride it out, your home value is almost always going to improve in time.  By simply sitting back and paying down your mortgage, you’re going to build equity one monthly payment at a time, and when the market improves, you’ll get additional equity for doing nothing at all.

If you want to get the greatest equity out of your Sioux Falls home, leave the flipping mentality by the wayside, embrace a long-term commitment, and then sit back and watch your investment grow.  One day, when the market is right, you can sell and enjoy the greatest potential equity from your property.

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