Home | Finance | Real Estate
Market fluctuations, location, and proprietor upkeep all play an essential role in the value of your home. Your real estate equity is the difference of what you owe on your mortgage(s) and the current market value of your property. In many instances equity takes time to add to up any substantial amount. Of course when the market turns on a flat or downward spiral you can lose a substantial amount of equity if you are not prepared for it. The average appreciation is 7% per year for a national average and in some cases we have seen up to 20% or more. Although these are rare occurrences they make the real estate market the most profitable marketplace in the country. One of the better misconceptions about real estate is leverage. When you have exceeded the 80% Loan to Value limit on your mortgage you are eating away at your own personal wealth. Your interest rates are higher and your overall cash flow is decreased substantially. So how can you build up and protect your equity in any type of situation? Here are 3 ways you can build real estate equity. The first and most common way to build real estate equity is the old fashioned fixed rate loan with terms between 10 - 50 years. Of course the longer the term the more stretched the pain of a mortgage may be. If we were to look at a number line and we placed from left to right the terms (length of time for the fixed period) of the fixed rate mortgage you would see starting at the left 6 months to 50 years. All of these would be increasing 6 months, 1 year, 2 years and so on... All of these numbers would be on the bottom of this rule. Secondly on top of the number line you would look at interest rates starting from the left let's look at the 6 months term = 5.5%, the 1 year term = 5.87% and the rates increase upward the longer you secure your fixed rate period. The second option is using an equity builder program such as the biweekly payment plans or the extra principle payment once a month to your mortgage lender. Problems here are the extra amounts of cash going to the lender and the extra steps in paying your biweekly payments. The biweekly payment plan works because interest is figured on a daily principle balance if you pay 1/2 of your mortgage on the 1st of the month and 1/2 on the 15th of the month you essentially cheat the system because you are breaking the interest accrual down from every 30 days to every 15 days. Hopefully your lender is quick with payment processing. The third option is to calculate the difference between your fixed rate mortgage and an interest only mortgage payment. By obtaining an interest only payment and paying the 30 year fixed rate payment you are again cheating the system by lowering the principle every month. This results in building up your real estate equity faster than the traditional fixed rate mortgage.
Information and Articles: http://www.mastersmba.com
Providing Information on various topics, please browse our other Articles for more informative resources, we house information on every topic imaginable so regardless of your needs you can be assured to find the answer here. If you wish to reprint this on your own website, simply click the "Web Version" in the right menu, and you are presented with a pre-formatted document to use.
A lot of the information is written by the Master Article team, and published exclusively on the MastersMBA.com website, and we do our best to research all information to ensure it's as accurate as possible. However at times we also publish documents given to us by other sources, we do examine these documents to ensure they are as accurate and correct as possible however at times they discuss highly specialized fields making it hard to authenticate the validity of every fact in the document. These are written by specialists in their respective fields, and we do trust their integrity and judgment however it's always a good idea when doing any research to consult a number of sources and form your own conclusion based on a number of view points.
