Whether you’re looking to purchase your first home or you’ve been paying down your mortgage for years, finding ways to build home equity quickly is a smart move. It ensures your home loan balance remains below the fair market value of your house, which helps you sell for a larger profit. Plus, it can help you gain access to financial products like a HELOC, which gives you a lower-interest borrowing option you can use for home improvements or other purposes.
Equity usually builds slowly over time. However, you can accelerate the process by embracing the right strategies. To get some ideas, take a look at 15 key ways you can build home equity in less time.
1. Choose a Shorter Loan Term
Whether you’re getting your first mortgage or looking to refinance your existing home loan, choosing a shorter loan term lets you build equity faster. You’re making larger payments, so you’re tackling the principal quicker. The less you owe on the principal, the more equity you have in the end.
Because interest rates are often lower on shorter-term mortgages, this is also a great way to obtain a low-interest home loan. That makes them a win-win if the bigger payments are in your budget.
2. Put Down More Money
One helpful mortgage tip is to make sure you put down a large enough down payment to avoid private mortgage insurance (PMI). For a conventional mortgage, that typically means having a down payment that’s at least 20% of the home’s purchase price. However, putting more money down gives you additional automatic equity. As a result, it’s wise to make your down payment as sizable as possible.
3. Pay More Than the Minimum
A classic way to conquer debt faster is to pay more than your minimum payment each month. By using that approach with your mortgage, the principal reduces quicker. You spend less in interest overall, and it lets you build equity in less time.
4. Consider Refinancing
Refinancing can help you boost your equity fast in one of two ways. First, it can let you choose a shorter term, which, as mentioned above, can lower your principal faster. Second, it could help you get a lower interest rate.
With the latter, you usually end up with a lower monthly payment if you keep the term the same. You can then continue to pay your current monthly payment amount towards the new loan. By sending the extra money to your lender, you’re putting more toward the principal balance each month, which gives you additional equity with every payment.
5. Do Some Remodeling
Many home improvement projects can increase the value of your home. Refreshing the kitchen or bathroom can result in a significant gain if yours is currently out of date. Similarly, adding a bedroom can make a difference, and energy-efficiency upgrades may come with rebates or tax credits. These allow you to boost your home’s value while capturing other types of savings.
In some cases, even low-cost updates can lead to higher home values. Improving your landscaping and painting your home’s exterior can have an impact on curb appeal, boosting your home value with potentially minimal out-of-pocket costs.
If you aren’t sure what to address first, start in the areas of your home that typically drive value, such as the kitchen and master bathroom. You can also look into adding missing features that are popular. For example, if your laundry space is in the garage, adding one inside your home could help. Similarly, if you don’t have a master bath, installing one could be worthwhile.
6. Keep Up With Maintenance
While making updates can improve your home’s value, neglecting regular maintenance tasks can drop your property value. Make sure you tackle essential tasks to ensure your house is in great condition. Inspect all major systems regularly, and fix issues as quickly as possible. That way, you’ll spend less compared to repairing larger problems that often occur when a system is neglected.
Additionally, make sure your roof, siding and similar features receive regular, correct maintenance. This extends their lifespans. If they do fall into disrepair, replace or repair the damage quickly to ensure the underlying structure remains properly protected.
7. Pay Closing Costs in Cash
Closing costs are typically about 3–5% of your loan amount. While you can normally get them rolled into your loan — either by offering the seller a higher price in exchange for handling them or by choosing a mortgage that allows it — that means taking on more debt.
Instead, paying your closing costs with cash allows you to keep your home loan smaller. Since the principal is lower, you end up with more equity right out of the gate. Plus, you’ll pay less in interest, which could make paying down your mortgage faster an easier task.
8. Buy in the Right Neighborhood
If you’re looking to purchase a new home, choose a neighborhood where values are likely to trend upward. This can take some careful research, but it lets you capitalize on market conditions. Overall, this leads to higher equity simply because the property is worth more than it was when you purchased it — and in a shorter amount of time.
In many cases, a bit of research can help you identify neighborhoods that are on an upward trajectory. Additionally, your real estate agent can provide insights. Use them as a resource to determine if some locations have more potential than others.
9. Consider a Fixer-Upper
Another option for securing equity relatively quickly is to purchase a fixer-upper when you buy a house. Then, you can use cash savings to boost the value of the property by making repairs or upgrades early on.
In some cases, you can even come out ahead if you use a renovation mortgage for the purchase. Just make sure you use the funds wisely to generate more value. Focus on the right projects to ensure you end up with as much equity as possible.
10. Send Windfalls to Your Mortgage
If larger monthly payments aren’t an option, sending windfalls to your mortgage can help you build quick equity too. Ultimately, any extra sum that goes towards paying down the principal might boost your equity. At the very least, it could keep you from ending up underwater during an unexpected market downturn.
Bonuses at work, tax refunds, monetary gifts and similar earnings can all add up. Plus, they’ll allow you to pay less interest overall, which also works in your favor. Just make sure you submit the payment towards the principal, not the overall balance on your mortgage, as some banks don’t do this allocation automatically.
11. Stick With the Classics When Renovating
Unconventional material choices may align with your taste, but they limit your buyer pool. And that can actually lower your home’s value. When you renovate, choosing materials that are popular or traditional can lead to a higher appraisal value that boosts your equity.
In many cases, you want to make anything that’s more permanent — such as flooring, cabinets and countertops — as universally appealing and neutral as possible. By sticking with neutral tones, you can add your own flair through accessories to ensure it matches your preferences while still maintaining your home’s value. Plus, a neutral design scheme makes it easier for a real estate agent to stage your home when it comes time to sell.
12. Buy Less Home Than You Can Afford
Many homebuyers look at properties near the top ends of their budget ranges. By choosing a lower-cost house, you end up with smaller mortgage payments. With these, you may be able to afford improvements out of pocket or make larger payments with greater ease.
Plus, because you aren’t stretching your budget, you’ll have an easier time building an emergency fund and handling other debts. In turn, you may have less of a need to use your equity, even when the unexpected happens.
13. Don’t Tap Your Equity Unnecessarily
Whether you choose a cash-out refinance, HELOC or home equity loan, you’re acquiring a debt that taps into your existing equity. This reduces your total amount of equity as a result. By not using those forms of financing, you keep your equity intact. Instead, try to save up cash to cover expenses like home improvements or debt repayments. That way, your equity remains a resource.
14. Make Mortgage Payments Biweekly
If you want to build equity faster without having to improve your home, biweekly mortgage payments can help. You can make half of your monthly mortgage payment every two weeks.
Along with potentially saving you on interest, you make the equivalent of 13 full payments per year instead of 12, allowing you to chip away at the principal faster. As a result, you might tackle a 30-year mortgage up to eight years early while potentially reducing your interest costs by up to 30%.
15. Remain Patient
As mentioned, the easiest way to build home equity is to allow time to pass. You’ll end up paying down more of your mortgage and benefit from the appreciation that occurs in most areas. By remaining patient, you’ll likely see the value of your home grow even if you take no actions beyond maintaining the property.
Just be aware that market downturns can happen. You may need to ride a few waves along the way. But even with those, time traditionally results in a gain. Most downturns are ultimately followed by growth periods, making it possible to still come out ahead.
