Saving or Spending your Homeowners Equity - Part 1

Need to raise some cash? Whether you have had your home for a long time, or a short time, you may still have usable equity invested in it. One reason is because equity can accrue without any effort on your part. You can also help your equity to accrue, and once you have equity, it can be made to work for you.

Depending on how long you have owned your present house, it will probably be worth more than you paid for it. When you first buy a home, the mortgage payments for the first five or so years seem to be mostly paying off the large interest portion. So your home is only being paid for by you little by little. But in most healthy realty climates, the purchase price of your home is quietly rising with the current market value of houses.

Of course, you can push up the equity in your home by renovating it, or adding improvements. If you can do your own basement or loft conversion, it will increase the market value considerably.

Also such renovations as landscaping, re-wiring, new kitchens, new bathrooms, paint job, installing a fireplace. building a garage, re-roofing, building a fence, will all increase the value and sale-ability of your home.

Beware of your choices here, because not everything will bring back your investment dollars; realtors advise that a swimming pool costs more to install than the increase in your house value. Likewise a hot tub.

Another way to increase your own equity is to take out a mortgage contract where the policy allows you to pay off a lump sum once a year. This knocks down your interest charges considerably, or you can just leave your payments the way they are and finish paying off your mortgage before the due date.

So, equity can be increased by simply having paid into your mortgage for several years, by doing home renovations and especially improvements like adding a room, by paying off a lump sum every year and by rises in the real estate market in your area.

Having found out how to increase your equity, how do you go about realizing it for your own use? See Part 2 for this.