Last Updated on December 11, 2019
One of the joys of buying a home is knowing that each dollar you pay out in mortgage payment goes toward building equity in the house. Each payment puts you closer to owning the home free and clear. To achieve this goal quickly, you need to ensure that you’re not carrying an expensive home loan.
Taking advantage of the affordable mortgage refinance rate in Salt Lake City can help you lower the cost of your home loan. It can help speed up your journey to owning the home free and clear. Here are some additional ways to help you build home equity quickly.
1. Create a personal budget
Now, there’s nothing to ground shaking about creating and following a budget but most people struggle with it, and it leaves their finances in shambles. One of the poignant advantages of using a budget is that it helps you track your spending habits.
Uncontrolled spending habits are the root cause of financial problems. Following a budget does more than helping you to account for your money as it also gives deep insights into your money habits. You get to understand how and where you spend most of your money.
The question then becomes whether that’s the best way to splurge your hard-earned dollars. When you follow a budget, you can eliminate some unnecessary expenses from your budget. You can then channel the money to a better cause such as saving for a rainy day or investing to secure your future.
2. Make an extra mortgage payment
Now the idea of paying more than you have to might be a tad unsettling, but the payoff makes it worthwhile. See, any money that you pay above the standard amount goes towards lowering the principal amount.
Each monthly payment comprises of the home loan’s interest and the principal amount. The interest makes up the lion share of each payment. Each extra payment you make goes toward repaying the principal amount. In other words, it goes toward building equity in the home.
None of the interest you pay on loan goes towards building equity in the house. Lowering the principal amount also helps to reduce the amount of interest you pay. Banks tend to frontload the monthly repayment with interest in a quest to make their money quickly.
Paying off the interest first leaves the principal amount mostly unpaid, and this keeps the interest on the loan high. Additional payments have the added advantage of lowering both the interest and loan amount.
3. Shore up your income
The speed at which you build home equity boils down to the state of your finances. In addition to cutting out unnecessary expenses, you can also work towards creating an extra income.
Combining both of these tactics is an excellent way to lower the principal loan amount, which is the key to owing the home free and clear.
Therefore, you might consider taking on an extra shift at work or getting a second job. If neither of these is possible, consider cashing in on your expertise. For instance, if you’re an accountant, you can moonlight as a freelance bookkeeper for local firms.