Top 4 Ways to Buy a Home with Equity

Hello Hampton Roads,

Having and growing equity is the much sought after goal for home owners because having equity means having options.  It increases financial stability and adds to one's net worth.   So what exactly is equity?  Equity is the unencumbered value of what the home is worth.  For example if the market value of a home is $200,000 and the mortgage loan is $160,000 then the equity is $40,000, or 20%. 100% equity means that the home has no mortgage and is unencumbered.

When buying a home, there are strategies you can use to create a better equity position yourself.  Here are my top 4 ways (in reverse order) to buy a home with equity:

Strategy #4:  Increase the Down Payment
This is probably the most obvious way to build equity and the most straightforward way to reduce your mortgage payment. You save on monthly payments and potential fees like PMI.
PMI (Private mortage insurance) is an additional fee charged by your lender when you have less than 20% down.

Strategy #3:  Make One Extra Month's Mortgage Payment
If you've just bought a home, the early years of your mortgage payment are predominantly interest. If you make one extra mortgage payment a year it can shave thousands in interest and years off your mortgage and help you build equity faster. To see how much you can save check out this extra payments calculator.  With a little savings and discipline, this is an option for many home buyers.

Strategy #2:  Buy Below Market Value
If you don't mind doing a little work, you can buy a foreclosure or fixer upper which are usually priced below market value due to their condition. The amount of equity will be determined by the appraised value of the home, and what your paying less any down payment.  You don't always have to buy a distressed property to walk  away with equity; it is possible to find a  motivated seller whose home has been on the market a while and is willing to negotiate on the price in exchange for a faster closing.

Strategy #1:  Use OPM for the Down Payment
Buy using OPM (Other People's Money)--I mean using available home-buyer programs and grants that may be availble to you. There are programs for first time home buyers and repeat home buyers alike and also programs for Community Partners such as teachers, medical workers, police and first responders. If you can qualify and don't take advantage of these programs you are leaving money on the table.

There a lot of misconceptions about home-buying grants, particularly that they are only for those with very low incomes, but that is not necessarily true. There are programs that are very income restricted, but the state grant program's income limit for a family of 3 or more is up to $77,600.00.  If you would like to find out more visit:

If you are thinking of buying a home and would like to discuss your specific plans and the best way to get started, I'm happy to help!

Thanks for Reading,


Serving your Hampton Roads and Virginia Beach Real Estate needs. Liz Schuyler on Google+


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