Wondering what is sweat equity? While sweat equity can involve actually sweating, what it means is adding value to your home. Keep reading this ABCs of Mortgage to learn more. 

What is sweat equity?

There are improvement projects you can do to your home that don't cost a lot, but do increase its value; such as painting the kitchen cabinets or putting inexpensive tile in the entryway. Completing such projects is called sweat equity. But avoid making super expensive improvements that immediately lose value, such as adding really expensive entry doors. Also know that adding items like brightly colored appliances don't do anything for your home's value.

How can I gain sweat equity in my home?

Gain equity in your home with:

1. Your down payment
2. Payments on your principal
3. Increasing the value of your home

If you're already a homeowner, then the first two are already being taken care of (as long as you are actually making your payments on time 👀). If you're looking to gain further equity, "put some sweat into it" and increase your home's value. 

How?

Start on projects to improve your home, whether that be aesthetically or in functionality. 

• • • Popular aesthetic appeal include stone veneers, backsplashes, and a new stain or paint job. 
    • As far as functionionality, consider adding a room/closet, a fire pit or grill area, or even transforming your home into a smart home. 

Some of these updates are self-projects you could do in a weekend. But for the more complex options, like adding a room, you'll want to consider hiring a contractor. 

How does sweat equity help?

As you put sweat equity into your home, your home's value increases. That means building up your investment that may end up being a goldmine down the road. This could be beneficial when you consider a cash-out refinance to tap into gained equity for cash in your pocket, or when you sell your home. Either way, you'll end up with cash when you need it. 

What do I do now?

Start planning easy projects to ease yourself into a sweat equity gain. If you need assistance in projects, scout out good contractors. You may be able to ask your neighbors on who to use, or your friendly, local loan officer. If you're planning a cash-out refinance, or even a renovation refinance, to tap into gained equity, a convo with your loan officer will be a great place to start. 

It may seem, at first, that you're pouring a lot of money into your home. However, with your payments and sweat equity, you're actually investing in your property, and gaining further equity you'll benefit from in the future. That's the beauty of homeownership – enjoy it!

Chat with a loan officer.