Blog

Building equity is one of the most powerful benefits of being a home owner. It gives you the security of knowing you can borrow money for any reason, it allows you to make a profit when you sell your home, it and it allows you to build wealth. A home is an asset and the more it’s worth the more potential equity there is for the homeowner.

The most obvious way to build equity in your home doesn’t involve any kind of project at all, but for those looking to build equity without changing their house this is an option. You can increase your equity by reducing the amount you owe on your mortgage. There are many ways you can do this. For new home owners, you can try to put down at least 20%, if not more. The larger your down payment, the less you will owe. If you already have a mortgage, you can do things like making an extra mortgage payment each year, adding an additional amount to your payment each month, or paying bi-weekly instead of monthly. All of these things can potentially lower your mortgage without any renovations.

Now, let’s talk about home projects that can add value to your home. One of the smartest investments you can make as a home owner is to make your home more energy efficient. Not only will you save yourself money as a home owner and help the environment, you’ll also increase the value of your home and make it more attractive to potential buyers. There are tons of options for upgrades, like installing solar panels, upgrading to energy efficient lighting, heating & cooling systems, and updating all windows and doors. These are all things that will make your home more energy efficient and add value, adding equity.

Another way to add value to your home is to add square footage or living space. It may seem very obvious, but larger homes are worth more money. Whether it’s expanding existing living space or adding on a new addition, growing your space will grow your equity. Adding additional bathrooms or bedrooms is always a smart move. Knocking down a few walls to expand your kitchen and open the space can also give your home value a boost. When it comes to adding square footage, think of the most practical ways you can achieve this. Think of what potential buyers will be looking for in a home. Sometimes in order to add space you don’t necessarily even have to add space. You can create “living space” out of wasted or unfinished space also. Think of the value of a home with an unfinished basement versus one with a finished basement.

If you’re looking to make a big impact with a small budget, choose a room that has a high return on investment when it comes to improvements. There are two rooms in every house that can have a huge impact on the value; the kitchen and the bathroom. There never seems to be enough bathrooms for any family, so adding a bathroom or expanding one is a smart move whether you’re looking to add value to your home or not. Kitchens are no different, and are probably the most commonly remodeled room in any home. The kitchen is often the central hub of the household where people spend lots of time so it’s important to them. Making improvements that will make a kitchen more practical and presentable will pay off in the end, just don’t get carried away spending money on things you will never see a return from. Just because you see value in something doesn’t mean a potential buyer will.

The outside of your home also has room for equity growth. Adding new siding, replacing shutters or moldings, replacing the roof, all of these things can add value. Adding a deck can also bump up the value of your home.

These are just some of the ways you can add value to your home and boost your equity, but it’s important to keep in mind that you won’t always make back what you spent. There are many factors that can influence this. If your goal is to add value to sell the home quickly, it’s best to keep your design choices neutral. If you’re planning to live in the home for a long time then you can make more personal choices for your projects, but keep in mind the impact your improvements might have on the value of the home.

One last, but very important point to consider is the market value of your home. Not only should you be aware of the market value of your home, you should always be aware of the maximum value of your home and of the homes around yours. You don’t want to do renovations that will make the house worth more money if it will never sell for that price in that neighborhood. If you take a home that’s already worth $220,000 and you make some improvements and increase the value to $300,000. This is great, except that the highest priced home in your neighborhood is $250,000. You can also watch the market value over time to look for trends or patterns. This way if you’re not planning to sell until later down the road, you will know when the best time to sell is. You will see if there are times throughout the year that the value peaks.

Before we wrap up, you might be wondering how you can pay for some of these projects. Some people will borrow additional funds for improvements when they get their mortgage. Some of the projects are smaller or can be done over time to spread the cost out. But what about that big impact project? That grand master bathroom or brand-new kitchen?  There are two home loan options for people with existing mortgages. Some homeowners use their home’s equity to borrow to pay for the improvements. Another option would be to refinance an existing mortgage. Either way, it’s like re-investing in a good investment. Always speak to a trusted lending professional about your options.

Learn More

Citizens Savings Bank has multiple locations throughout Lackawanna, Wayne, and Monroe Counties. For branch locations and hours, visit our website. We also have a Customer Support Team ready to answer any questions you may have. Call us today at 1-800-692-6279 or email [email protected]. Member FDIC. Equal Housing Lender.