Build Equity Without Sweat

The safest way to build equity in your home is to buy a house for less money than your lender qualifies you for and with the biggest down payment you can manage. Don’t buy more house than you really need, and don’t buy more house than you are actually going to use and feel at home in. Same with the yard. Don’t buy lawn just for show; it’s just an expensive pain in the posterior unless your family and friends are rabid croquet players. On the other hand, a good garden never comes amiss, especially since none of us has a clue what happens next.

The object of underbuying, or simply buying less than your lender says you can afford, is to make the payments as painless as possible and so you can pay down the capital faster. There is no law that says you must buy the most expensive house your lender is willing to mortgage. Of course your lender wants you to buy the most house you can possibly stretch to. They make more money that way. So, are you buying the house for your own benefit, or that of the lender?

For many years, people have worked longer, harder, made more and more sacrifices just to meet mortgage payments and make lots of profits for lenders. Where’s the fun in that? If you learn to ‘live below your means’, you won’t be nearly so stressed out and who knows, you might actually have time and money to enjoy your home, rather than spending every waking moment earning the money to pay for it.

Your mortgage payments are mostly interest for many years. If you add extra money to your mortgage payment, write a separate check and specify the extra money is to be applied to the capital. Make sure your mortgage does not have a pre-payment penalty.

Look into the difference between a 15-year mortgage versus a 30-year mortgage. Again, if you underbuy, a 15-year mortgage should be easy to pay off, even if you don’t add extra money to the payment. A home that is paid off is a freeing thing.

The object is to pay off the mortgage so you own the home free and clear. The wisdom of using the equity in your home to finance other things has suddenly become questionable; a home equity loan should be employed only in the direst of circumstances.
Just imagine for a moment, how you would feel if your mortgage was paid off. Doesn’t that feel good? Didn’t you just stand up straighter and breathe easier? Of course, you can always ‘trade up’ later if you want to and can afford it.

Try it. Actually owning your own home is an idea so old-fashioned, it’s on the cutting edge of a new wave of thinking.

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