Don’t get me wrong, as much as buying your first home might be the ‘darling’ of your investment portfolio, it is still just another entrance into the financial books. And the reality is that an investment is only good when it improves your net worth.
Robert Kiyosaki got a lot of media attention when he said your house isn’t an asset. But the context of his statement was that most people’s homes take away money from your pocket rather than put money in it. And indeed, other investors like Rick Otton have also echoed this sentiment by emphasising the importance of making property work for you, instead of you working for your property.
After all, what is the point of an investment asset? Isn’t it so that it can put you in a stronger position as far as your purchasing and negotiating powers are concerned? People like the American President (Donald Trump) have so much pull in the world because of his excellent property investment portfolio.
Your first home should be the launching pad from which you can attain greater heights. But this will only work if you know how to increase its equity and use that to get better funding for more projects and property investments. With that being said, here is how to raise the equity of your first home.
Tricks to raising the equity of your first home
Pay off your mortgage balance
If you bought the home on loan, assuming that you did not get an interest only mortgage, then the more you pay it off every month, the more equity you gain. If you work hard enough to pay off the interest as well as the principal, with time, the amount you owe reduces and with every reduction, your home equity increases. That’s the simplest and most straightforward way to go about this matter. You could also choose to make lump sum payments often so as to increase your equity faster.
Do not refinance
As convenient as refinancing can be, it saps away at whatever equity you would have gained over the years. If you can avoid refinancing and pay off your mortgage completely, you will have put yourself in a position to retain all of your home equity.
Make home improvements
This is by far the most effective and fun way to increase your home equity. Making home improvements such as installing new bathrooms, expanding existing spaces to create new rooms, building an outdoor kitchen and renewing the roof greatly increases the value of your home.
As the home value increases so does your home equity stake. But you must choose home improvement projects that add actual value to the house as opposed to just aesthetics.
A great deal of the equity you gain comes when you sell the house for much more than you bought it.
To do that, you have to keep it well maintained and greatly improve the curb appeal.
Home staging works for a reason; people like optics. As long as the house looks good and works like a well-oiled machine, there is a good chance that it will sell faster and for a better price.