Besides making regular mortgage repayments, there are several ways you could try building equity in your property.
1. Increase the value of your property
One simple way to potentially increase the value of your property is to make small home improvements or renovations. This may be one of the easiest ways to build equity besides making mortgage repayments. By renovating to increase the value of your property, you can increase the equity you have in that property.
Some of the simple improvements you could consider if you are looking to renovate include:
- Internal or external painting
- Landscaping
- Roof replacement
- Floor replacement
- Bathroom renovation
- Addition of a new bathroom
- Kitchen renovation
- Expansion of storage such as built-in wardrobes
The amount you spend on the renovations or improvements will affect the amount of equity it may create. For instance, repainting or re-landscaping may not cost much, but it also may not change the value by a lot. Whereas a bathroom or kitchen renovation will likely cost a lot, but could potentially add a lot of value to the property.
Deciding on how much to spend on renovations will depend on your situation. If you plan to sell the property, it’s recommended not to spend more on renovations than you hope to recoup when you sell the property.
2. Making additional lump sum repayments
If your mortgage allows you to make additional repayments without incurring a fee, it can be an effective way to increase your equity and decrease the amount of interest you’re paying on your mortgage. Check your home loan terms to ensure there aren’t fees for these payments. For instance, many fixed-rate home loans won’t allow additional repayments without a fee.
3. Making more regular repayments
If you can change your regular repayments from monthly to fortnightly or weekly, you may pay less interest overall, and it could help you increase the equity. If you’re considering this option, discuss it with your lender to find out how to make this work. Also, make sure that you choose a payment frequency that suits your pay cycle. You don’t want to change your repayments if it causes financial distress.