The importance of building equity in your home
Going along with our blog post earlier this week called “Home Buyer Tips for Building Equity”, we wanted to go into depth a little bit on the importance of building equity in your home.
If you are investment-minded like we are, then you will agree with what we tell our Greater Rochester area real estate clients:
“Your home can be your largest investment… choose wisely.”
About that for a minute….
We have heard, “but I don’t ever want to sell, so who cares about equity?” If you are one of those people, we urge you to read this paragraph. Not to scare you or be negative, but life is unpredictable. You may think you will never want to move again, but sometimes circumstances arise that can put you into a situation you never considered, such as: health complications, loss of job, divorce, better job offer (relocate), death or failing health of a family member, to name a few.
Let’s say you don’t have to move… There still may be times in your life you need to use the equity in your home for a short-term loan to float you through difficult times (Home Equity Loan or Home Equity Line of Credit – also referred to as HELOC). This can be a saving grace. They are much lower interest rates than a credit card or unsecured loan, making it a wise choice when you do need to borrow.
So hopefully by now you are at least considering that it may be wise to build equity in your home.
Now let’s remember, when you buy a home and obtain a mortgage, the bank actually owns your house until you have fully paid off the mortgage. Which means if you want to sell your house before it is paid off, you need to get enough from the sale to pay off the bank, pay closing costs to sell, pay closing costs to buy a new home, and in most cases put a down payment on the home you are buying.
Now do you see why building equity in your home can really pay off?
Imagine for a moment that you have owned a home for a while and maintained it as needed. If you choose a home in a good or up and coming location, then your home could still have increased enough in value so that you can afford to sell.
(Live in Greater Rochester NY area and need to know for sure? Contact Theresa Du Bois at 585.752.9453 for a free, no hassle comparative market analysis report.)
Here is an example:
Sally and Jim bought their home in an up and coming neighborhood on the west side of Rochester 15 years ago for $100,000. Over the course of 15 years, they needed to replace their roof and furnace, and they decided to update the kitchen floor and countertops, and the bathroom floor and shower surround. Sally’s mother has experienced some health problems and now needs some assistance with trips to the grocery store, running errands, cleaning the house, and so on. She lives in Webster on the east side of Rochester, much closer to Jim’s work, and Sally has been visiting her several times per week. They decided to move closer to her mother and Jim’s work. Because they chose a smart location when buying their current home, they were able to sell for $125,000 within 3 weeks of placing it on the market. They had enough money to pay off their remaining mortgage and closing costs, and to put a nice down payment on the home they purchased (with some cash in the bank to boot!).
This is a great example of how to make your home work for you as a smart investment. For more real estate tips, check back on our blog frequently or email us at Michael.Theresa@PrudentialDiscover.com with topic requests/suggestions.
Also, if you need to sell but are afraid you don’t have enough to cover the expense, let us know and we will see if some creative options will work for you.
Regards,
Michael & Theresa Du Bois
Agents, Prudential Discover Real Estate
Owners, Turn Key Headquarters
Michael: 585.752.9454 (investors, contractors)
Theresa: 585.752.9453 (buyers and sellers)