Buying a home, you own a certain percentage which grows over time. This is your equity. Home equity represents both the value of your home and the percentage that you own therefore the percentage of that value. Your net worth is increased by equity and it is something you can borrow against, making equity quite powerful and beneficial to your financial life.
You can build equity by paying off your mortgage, increasing the home’s value, or both. With the hot Denver real estate market, the more of your home you own, the better position you are in to profit in the future. Whether you are moving to Denver or buying a house in your hometown for the first time, let’s talk about home equity and how to build it.
What Is Home Equity and Why Does it Matter?
Equity is the total value of your home that you own outright. It is determined by the percentage of your home that you own through mortgage payments and the total value of your home. Building equity is essential for financial growth for all homeowners. You can build it through mortgage payments, appreciation of your property value, and adding to your property value with home improvements.
2024 Denver Real Estate Market Overview
The median sale price of Denver homes in 2024 is 693,000, which has increased by over 16% since January. Homes continue to appreciate, but the market is currently favorable to buyers. This also makes Denver a prime location for growing equity after buying a home considering the current housing market. High-growth neighborhoods include Cherry Creek, Washington Park, Capitol Hill, and Five Points.
Key Steps to Building Home Equity in 2024
You can use these five strategies to grow your equity, starting with the purchasing process.
Smart Purchase Decisions
Look to buy a home in a neighborhood experiencing rapid appreciation. Homes that will appreciate should be in desirable locations and in good condition. The valuable knowledge of a Denver agent can also lead you to good deals that will quickly accelerate the value of your home over time.
Make a Larger Down Payment
Your initial home equity is determined by the size of your down payment. This determines the total percentage of the home you own before your first mortgage payment. Implement smart budgeting and saving to prepare a larger down payment before you buy.
Pay More Than the Minimum on Your Mortgage
Accelerating your mortgage payments can help you outpace the interest, so you can make extra payments on the principle (core value) of your home. This has a long-term impact on equity which grows with each mortgage payment over time.
Home Improvements That Add Value
Home improvements can also add value to your home, including the percentage you already own. The best value-increasing improvements include timely updates, small kitchen and bathroom renovations, and outdoor living improvements.
Leverage Market Appreciation
Home values in Denver are rising, which will contribute to how quickly you grow equity. Market timing is important to get the most from appreciation equity.
Leveraging Local Expertise for Maximum Equity
Working with an experienced Denver agent can also help you find a good deal on a home in an appreciating neighborhood. Local knowledge can guide you through the selection process including choosing the right neighborhood and a house with a lot of promise. They can also give you tips on home improvements that local Denver buyers love, thus boosting your home’s market value.
Common Mistakes to Avoid When Building Home Equity
When strategizing to raise equity, there are also a few mistakes that you can avoid by knowing them.
Over-Improving Your Home
Avoid overspending on renovations. Budget-friendly renovations are often more effectively value-adding than luxury upgrades.
Ignoring Market Trends
Pay attention to Denver market trends. You can adapt to market changes to protect your equity.
Underestimating Professional Guidance
Lastly, don’t underestimate the importance of working with a professional team. Navigating the market alone can lead to missed opportunities.
Get Started Building Your Home Equity
Denver is an excellent market to buy a home and immediately begin building equity. Take action with the help of a local Denver agent to start building equity and make informed decisions in the real estate market. Contact Dyllan Nguyen today!
