Negative Equity | Top 5 Ways To Rebuild Your Home Equity
Home Equity is defined as the market value placed over a house after the remaining mortgage payments. It builds up over time as the property owner continues to pay off the house loan.
This is a pretty straightforward explanation of the term but what goes beyond the definition is a complex process, where property owners struggle with a depreciated equity due to a sudden decrease in property value in an area or an outstanding mortgage that is more than what the house is worth.
In a CoreLogic (a leading global property information, analytics and data-enabled services provider) report, by the first quarter of 2016 there is approximately 4 million or 8 percent of all houses with mortgage have no equity.
This situation seems bigger than the local weather report in early mornings. The fact that homeowners are facing a financial crisis involving their homes and the possibility of losing it, requires more attention and helpful guide on how to deal with no equity properties.
The Disadvantage Of Negative Equity
When news about the real estate market value dropping in some areas break out, you must find out if your area has been affected by the drop. If it is, then most likely, the value of your property may have dropped as well. This is not a cause of concern if your mortgage is still within the price you bought the property for.
Have a local real estate agent take a look at your home and find out its current value. If it turns out that you are “underwater”, then this could lead to some serious repercussions on your repayment agreements.
If you wish to refinance your mortgage, perhaps to get a more suitable refinancing plan from your lender or get a cheaper deal, the lender may not grant this request. Most lenders doesn’t allow homeowners with negative equity to change into a new mortgage deal. Find out how you can refinance with FHA in this article.
Other disadvantages include:
- The possibility of paying early repayment charges on the existing loan.
- Selling the house might not be possible.
- Extra fees and charges my be incurred.
- Only a few lenders offer refinancing a mortgage.
As hopelessly difficult as it may seem, there are ways to rebuild the value of your home.
Top 5 Ways To Improve Home Equity And More
Dropping Mortgage Balance
By diligently paying off the mortgage each month, a portion of the interest and principal loan is being paid off. This will help you improve the home value of your property.
Bigger Mortgage Payments
By paying more than what you owe each month, the added amount will be applied to the principal loan. Bigger loan payments equal to gaining home equity a lot faster.
Paying Off Twice a Month
Talk with your lender. Ask for a compromise and set up a biweekly repayment plan (if this is possible with your current cash flow). Once you make 26 payments throughout the year, this will trim down the repayment term, which eventually helps you save up on the interest rates.
Cutting Down the Mortgage Term.
Shorten the payment terms. Cut it down to 20 or 15 years. Although this means paying up more on your monthly obligation, but you can negotiate for a lower mortgage rate, plus building back your equity much faster.
House Prices Eventually Increase.
If you’re lucky enough to be in a booming community, there is a greater chance that the value of your home will increase on its own, dragging up the equity with it. You wouldn’t have to exert so much effort in this case, however, it could go the opposite way as well.
Invest More on Down Payment.
Putting in a larger down payment means you can outset the automatically acquired home equity, which leads to a lower loan-to-value ratio and lower interest rates.
Keep your house well preserved and properly maintained. When it is time to sell the property, keeping it in a good condition will give you a better shot at having a higher home value.
When It Is Time To Sell
All the work you have poured into your home will come to fruition when it is time to move out. Either through the traditional method or a fast “sell my house NYC” alternative route, the fact that you were able to rebuild the equity is an achievement worth commending.
At Sell Any House, we offer alternative solutions to homeowners in need of a fast home sale. We have been helping New York homeowners let go of an unwanted house in as little as 5 days. May it be about relocation, retirement, behind on payments, or or legal matters, we buy houses fast.
We understand the urgent need to sell a house right away minus the hassle and stress that comes with it. Get to know more about our fast house buying process and practical alternative solutions from one of our real estate investors today!
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