Every home owner has the chance to build equity in their home over time, but here’s how to speed up the process. Equity is the difference between the market value of your property and the amount you still owe on your loan. The quicker you build equity, the earlier the opportunity to invest further, expand your portfolio and build your wealth.
Buy at a good price
If you can manage to secure your home for a good price at the start, you will not only save money up front, but also reduce your interest costs over time. It can also help you to build up equity faster.
Mastering the art of negotiation is your best bet for securing a good purchase price. Start by doing your sums and knowing your limit, but never disclose to the seller your top price. Place a time limit on your offer and tempt the seller with something like a quick sale.
Buy in an ‘up-and-coming’ area
Look to buy in an area where market demographics show expected growth, injection of new business or infrastructure. It can take time to put in the research but the payoff will be worth it when you secure a property for a reasonable price that starts to rises in value.
Buy a property that can be improved
Renovation can increase the value of a property but be aware that it takes time, money and experience. If you’re not keen to make this kind of commitment, you could think about buying a property that needs a bit of cosmetic work. Freshening up the exterior, painting, adding a storage area or tidying up the bathroom/kitchen up can cost less and improve property value. Just be careful to spend money on the right things, as not all improvements actually add to the property’s dollar value!
Pay your loan off sooner
Aim to contribute as much as you can towards the purchase at the start, so your home loan is as low as possible. Then look for ways to repay your home loan early: increase the regularity of your repayments, make larger repayments or make lump sum repayments (providing your loan has the flexibility to allow this without penalty). Another option is to use an interest offset account which can help reduce the amount of interest charged on your home loan.
