Increasing property equity and reducing debt are important goals for any homeowner, but in today’s market, relying solely on capital growth to achieve these goals can be risky. Fortunately, there are several strategies homeowners can use to increase equity and reduce debt without relying on capital growth.

1. Make extra principal payments on your mortgage.

By paying more than the minimum required payment each month, you can reduce the overall interest you pay on your mortgage and increase your equity faster.

For example, if your regular mortgage payment is $1,500 and you want to make an extra principal payment of $500, you would make your mortgage payment $2,000 per month.

Another way to make extra principal payments is to make “extra” payments throughout the year. For example, you can make one extra mortgage payment per year, or you can make half of a mortgage payment every two weeks instead of once a month. This will help you pay off your mortgage faster and reduce the amount of interest you pay over the life of the loan.

It’s important to note that making extra principal payments may not always be the best option for everyone. Before making extra payments, it’s important to consider your overall financial situation and whether or not you have enough money set aside for emergencies and other financial goals. Also, you should check with your lender to make sure that extra payments are accepted and if there are any penalties or fees associated with making extra payments.

2. Refinance your mortgage.

If interest rates have dropped since you took out your mortgage, refinancing to a lower rate can save you money on interest and help you pay off your mortgage faster.

Some homeowners may choose to refinance their mortgage to get cash out of their property. This can be helpful if you need to make home improvements, pay off other debts, or make a large purchase.

Refinancing can also allow you to change the type of loan you have. For example, you can refinance from an adjustable-rate mortgage to a fixed-rate mortgage, or from a government-insured loan to a conventional loan.

It’s important to note that refinancing can also have costs associated with it, such as closing costs, appraisal fees, and origination fees. So, it’s important to weigh the potential benefits against the costs of refinancing. It’s also a good idea to compare rates from multiple lenders to ensure you are getting the best deal.

3. Rent out a room or a portion of your property.

Renting out a room or portion of your property can provide additional income to help you make extra principal payments on your mortgage or pay down other debts.

As a live-in landlord, you may be able to claim a portion of your expenses associated with the rental of the room, such as mortgage interest, council rates, and insurance. This can help offset the income you receive from renting the room.

You may be able to claim depreciation on the assets used in the rental of the room, such as furniture, appliances, and building elements.

When you sell your home, you may be eligible for a Capital Gains Tax  main residence exemption if you have used the property as your main residence for the entirety of your ownership and rented out a room in that property. This can potentially reduce the amount of CGT that you need to pay when you sell your home.

4. Make energy-efficient upgrades to your property.

Upgrades such as installing solar panels or energy-efficient appliances can lower your utility bills and increase the value of your property.

Keep your property well-maintained. Regularly maintaining your property can help preserve its value and appeal to potential buyers or renters.

5. Consider a line of credit.

A line of credit can provide access to cash when you need it and can be used to make extra principal payments on your mortgage, pay off other debts, or make home improvements.

By implementing these strategies, homeowners can increase their property equity and reduce their debt without relying on capital growth. It’s important to remember, however, that these strategies take time and effort to implement and may not be suitable for everyone. Homeowners should carefully consider their options and consult with a financial advisor before making any major financial decisions. At National Wealth Advisory, we can connect you with a database of trusted financial advisors that best suit your financial circumstances.

As an added bonus, implementing some of these strategies may also increase the chance of renting or selling your property. Remember that having a well-maintained and energy-efficient property is more attractive to renters or buyers. It’s always a good idea to make sure the property is in good condition and that it’s efficient. This can increase your chances of renting or selling your property and also increasing your equity.

In conclusion, increasing property equity and reducing debt are important goals for any homeowner, but relying solely on capital growth can be risky. 

Talk to our team at National Wealth Advisory. We can connect you with experts that will provide you with invaluable advice that will allow you to achieve your financial goals without relying on capital growth in today’s market. 

Disclaimer: The information provided on this website is for general informational purposes only and is not intended to provide specific financial or investment advice based on individual circumstances.