There are a number of mortgages out there that give you low payments each month. Some of these mortgages, such as interest only, adjustable rate mortgages, and a few others, gave you the low payment up front – but it was at the expense of building up your equity. Here is how refinancing your mortgage can enable you to start building up your equity faster.
Equity is the amount of cash you have available after you have lived in your home for some time. It is the difference between the current value of your home and the amount you still need to pay on your mortgage. Mortgages that allow you to make low payments up front, though, usually will use your cash to pay the interest – and it does not reduce the principal much if at all. Your equity, however, can only be built up when you pay down the principal.
This could leave you with a couple of options if you want to build up your equity quicker. The first option would be to put down a large chunk of cash at one time. Most of it would be applied to your principal. Most people, however, do not have the opportunity to do this.
A second option would be to refinance your mortgage. If you watch the...
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