4 Changes that Make a Big Difference with your Home Equity

Tuesday Sep 07th, 2021


The Great Toronto Area’s housing market is one flexible and rapidly changing market of all times. This ground is a little challenging to play in, from fluctuation in prices and demands to the uncertainty of interest rates. 


Home equity is also known as a home equity installment loan or second mortgage. It helps the homeowners to borrow against their equity. These loans are based on two factors: the home’s current market value and mortgage balance due. 


One common question that crosses the mind when obtaining home equity is, “is there any way I can make a big difference with my home equity?” Although building equity may be a little time-consuming, it is worth the patience. Once it is done, you can slowly and gradually work on boosting it. These changes can help you make a big difference with your home equity (in favorable terms):


Big Down Payments

If you want to boost your home equity, consider putting down more. It is your down payment that decides your future equity. Hence, considering your mortgage options, you can put down a three to zero percent when you close on the home. 


Put down a minimum of 20% to avoid private mortgage insurance. 


Refinance to Short Term Loans

Refinancing to short-term loans can not only help you get a lower interest rate but also a good percentage of your mortgage payments go towards the principal each month, likewise building more equity. 


Increase Property Value

Another big difference that you can bring in your equity by increasing your property value. This could be done by making changes around the house. These changes include:

  1. Kitchen remodeling
  2. Bathroom remodeling
  3. Attic or basement remodeling
  4. Appliance up-gradation

However, avoid the following to add negative value to your home equity:

  1. Swimming pools
  2. Garage conversions
  3. Luxury upgrades


 More Mortgage Payments

Most mortgages follow the amortization schedule. This makes it easier for most people to make payments in equal installments over a specified time. This includes payment both: principal and interest. However, a good portion of these payments go to the interest at the start and more towards the principal as time goes on. 


A trick to make a difference in your equity is to decrease your overall due amount. Here is how you can pay your mortgage quicker: 

  1. Make your mortgage payments biweekly instead of once at the month's end. This can shorten your loan period as it adds extra payment to your mortgage every year. 
  2. Add a few sums each month while checking your budget. This means that if you have finances, you can add the remainder to your mortgage every month. This could happen after you have cleared any other loan payments. 


Patience: Wait for Better

Since Toronto's housing market changes, there can be many fluctuations in your house prices. To bring a good difference in your equity i.e. to boost it, look for times when the home prices and demand in your neighborhood increase. This will likewise increase your home value.

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