Although not everyone buys a home with building equity as their goal, we like to remind our clients that equity is a huge benefit to home ownership. It really is something you should keep in mind. In fact, the faster you build equity, the faster you grow your wealth. So how can you build home equity faster? Here’s our pro tips on home equity strategy for the Toronto Area Housing Market.
How is Equity Built?
Real quick, equity builds based on three things:
- It starts with your down payment. This is how much equity you have off the bat.
- Next, you look at the changing value of your home. As the market changes your home value will increase, as long as you didn’t overpay for your home.
- Last, as you pay down the principal on your mortgage, this also increases equity as you own a bigger and bigger portion of your home.
So, the idea of equity building is pretty easy.
Be Price Savvy
As a realtor Toronto buyers trust we understand market prices and ensure you never overpay for a home. This is key to building home equity fast as it has a domino effect:
- You need less down, so can afford to add to your down payment
- Your mortgage payments are lower, so you can save and contribute more based on the conditions of your mortgage
- Your house’s value rises as the market increases instead of the prices having to come up to the high price you paid
All these things contribute to home equity allowing you to generate more wealth.
Put Down More When Buying a House in Toronto
The more money you put down on your home, the more you own outright. However, it also reduces your mortgage payments. You could bank a little each month to put towards a lump sum on your mortgage each year if the conditions allow. This builds equity.
Invest in High Return Upgrades
Smart home upgrades increase your home’s value, boosting equity. The trick here is to speak to savvy realtors who know what investments will see the best ROI. Although you’ll never recoup 100% of your investment, a look at the cost vs value report tells you where to make changes. While it might seem a major upscale bathroom upgrade would pay off big time, minor upgrades can actually see as much as 20% more ROI. Exterior upgrades can also pay off.
Think Gentrification
There’s always an up-and-coming neighbourhood waiting for its time in the sun. We will advise you on the areas where home prices are lower now but will soon begin to rise. Appreciation equals equity. We keep an eye on the area’s most likely to increase in demand. This is an ongoing cycle for the most desirable houses for sale in Toronto. To leverage gentrification, we’ll find a lovely home in need of a little TLC and advise which upgrades will improve equity. We’ll also update you as demand grows in your neighbourhood, and how the demand is increasing your equity.
Be Mortgage Smart
Interest is a bitch, because you’ll pay a larger portion of your mortgage towards interest in the beginning. However, over time you’ll start to pay more towards the principal. The trick is understanding how your mortgage conditions affect your equity. For example, if you choose a biweekly payment for your mortgage, you actually end up making an extra payment every year. This saves money on interest. Another trick is to use extra money to add a bit more to your mortgage payments when you can. Paid off your car? Put those payments towards your mortgage. Tax refund? Mortgage. We can help you choose a mortgage with conditions that allow you to make extra payments without penalties. Last but not least, you can also consider a shorter-term loan. You’ll usually get lower interest rates, so more goes towards the principal. Just be aware you’ll pay more each month, so this won’t work for everyone.
Building equity is always a waiting game. However, these tips will help grow your equity faster.
If you’re looking for a team of Toronto realtors to help build equity fast, the Christine Cowern Team’s got you covered. Give us a call at 416.291.7372 or email us at hello@christinecowern.com. We’d love to work with you!
