How to increase your homes equity?

Question

We purchased a house last spring. We would like to be able to drop our morgage insurance in 2 or 3 years instead of the like 10 years they plan. We were told to increase the equity in our property and then have it reappraised. But we are confused on what will raise the equity. The house is in great condition and nothing really needs to be done.

In a book I read, it said basically you get back dollar for dollar what you put in from paint to new windows and doors. We have put in new carpet and painted. And are planning a small bathroom redo... mostly just to get rid of some terrible wall paper. We are considering a new patio door also. The only thing other then that is we need some added insulation in the attic. I don't know that would add equity. But what else can we do? And how do we know if something helps our equity?

Thanks for any answers.

Answer 1

Landscaping, make it look like a model home you would see in magazines.

Answer 2

In reality you are probably stuck with the comps in your neighborhood. If nothing has sold recently tthen you are stuck with what the rest of the homes are worth.

It is basically a "curb appeal" thing; put some money in the front yard with maybe a dry creek leading up to the front door, nice lawn and plants that are "green friendly" with a times and "green" irrigation system (I personally liek a nice drip system on a timer)

Then you can upgrade the kitchen with appliances that fit your region and new counter tops or flooring (granite is BIG in California).

A new front door does BIG things and is pretty cheap.

Look at solar heating; you can probably get a tax credit and it cuts the cost of ownership.

Then look at a flame proof roof; tile or fake tile is popular. It is a GREAT energy conserver and looks GOOD!

Now the last thing is to wire the house for security, internet, phone and multiple TV's. If you have a little knowledge you can probably do it yourself.

First, Keep in mind that I live in Southern California, but don't hold it against me.

There are RSC (residential structured cable) boxes that can be installed in the garage that allow you to run the wire and then make the connections standing up straight in the garage.

The THING that you do NOT want to do is to make your house the "WHO HAH" of the neighborhood.

On the surface it seems that you want to grow your equity faster than the going 6%-10% so you can refinance, BE CAREFUL! If you want to refinance to pay the note down VERY COOL, just don't use the new found cash for other purposes or it will BITE you in the donkey!

Look at the costs, the new interest rate and what it means to the wallet.

Be CAREFUL and I wish you the BEST.

Jacques

Answer 3

I've been selling real estate for awhile now and haven't really seen anyone get back dollar for dollar what they put into it in terms of carpet, paint and similar less expensive updating. Those kinds of things are more like regular maintenance. If you ever find a way to build equity quicker than the market around you let me know and we'll both be very happy homeowners. Besides paying down your mortgage you really have to count on rising home values in your area in order to build equity unless you bought a pretty rough house for a great deal and were able to really do some handy work. Every area is different too. How far are you from that 20% mark?

Answer 4

Taking your comments in reverse order:

You rarely get back dollar for dollar what you put into a house unless you are flipping it. Things like fresh paint, new carpet do NOT add value. They simply bring your house up to "market" condition. Appraisers rarely care about fresh paint or carpets.
Adding a bathroom or modernizing an outdated kitchen can add value, if you don't blow out the budget.

There are several ways to increase equity for the purpose of eliminating Mortgage Insurance (MI). The first, is to make slightly larger payments each month than the bank requires. Direct that overage to go to "principle reduction." You'd be amazed how quickly that will build equity. one extra payment a year can take more than seven years off a 30 year loan.

The other is to determine whether the property has appreciated - that is, are similar homes in your area selling for more than what you paid for it? If they are, you could have equity from appreciation. This is what an apprasier would find in an appraisal, but before paying several hundred dollars for an appraisal, see if you think there is anything for them to find (In 2-3 years from purchase there should be, but it depends on the LOCAL market (i.e. don't take what you read in USA Today for granter - national markets trends rarely translate to local real estate markets)

Answer 5

don't spend too much. Watch your expenses. Many people overspend on improvements and then have high expectations. When they put their houses on the market at a price THEY THINK IT SHOULD WORTH because of improvements and there are no offers, it doesn't feel good. It happens a lot. Generally, updating a kitchen is good. Floors, paint and things like that make a difference as well. Again, don't spend too much. Also focus on paying down your principle. Real estate is a long term investment. When the market comes back in 4-7 years down the road, you gonna a have huge equity.

Answer 6

From a professionals view point....

1. It's possible your homes value has increased to where you don't need to add more dollars to remove private mortage insurance.

2. You can refinance with another lender who will allow up to 90% LTV which will remove PMI.

It's in the lenders best interest to have you pay PMI. So, your best bet is to make upgrades to justify the increased value (very costly) or speak with a mortgage pro who can possibly get you out of the PMI.

Answer 7

For help on Home Equity I have got to know of two very good sites that i searched through net. You can also visit them.
They have really good information and provide good services on Mortgage loans, home equity loans, new home loans.

www.apply4less.com
www.proloanz.com

Answer 8

Read Harj Gill`s book - you will know what to do.