Increasing the equity in your home is part of responsible homeownership. It can give you
financial security and possibly provide collateral for a loan. Some homeowners can even get a
higher asking price when it’s time to sell.
Ready to start increasing your home equity? Here are a few tips to help you get started.
Reduce Your Mortgage
One of the easiest and fastest ways to increase equity is by paying off your mortgage. It’s also
the most effective option. Every dollar you add to your mortgage payments goes towards
Paying your mortgage off early has an added benefit. You are spending less money on interest
payments. You do want to check with your lender first to ensure there aren’t any fees or other
penalties associated with paying your mortgage off early.
Switch to a Short-Term Loan
Shortening the length of your home loan can increase your equity over time, but you want to be
aware of your financial situation. Refinancing to a short-term loan comes with higher monthly
payments. How much the payments increase depends on the terms of the loan.
Something else to consider is the costs associated with refinancing. You will pay closing costs
either upfront or added to the monthly mortgage payments.
Work on Improving Your Credit Score
Raising your credit score does not affect your home’s equity, but it does play a role in your
chances of being approved for a loan. Borrowers with poor credit are limited on the type of loans they may qualify for. Even if they have some home equity to use as collateral. For example, you may only qualify to use 70 percent of your equity to secure the loan. Boosting your credit score probably won’t let you use 100 percent of your home equity, but it can raise it to around 80 percent.
The higher borrowing amount can go towards home improvement projects, car repairs, and
other expenses that can build up with homeownership.
Increase Your Home’s Value
You can take on projects to increase the property’s value. Some home improvement projects
are budget-friendly, while others come at an expense. Your unique financial situation will help
determine what you can afford.
Landscaping is often a cost-effective way to add value to the property. Installing smart home
systems, solar panels, and energy-efficient lighting can also boost your equity.
Remodeling your home is a big project, but it also pays off in increased equity. Consider
renovating an unused space into a nursery or child’s playroom. These remodeling projects will
pay off when it’s time to sell your home or if you need to use the equity to secure an additional
Wait for the Housing Market to Fluctuate
Waiting for market fluctuations is usually not an ideal option. Instead of being proactive about
increasing your equity, you are waiting for the market to take care of it.
Housing prices routinely rise and fall, affecting your equity. You can wait until your home’s value
increases before using the equity as collateral. You will have to pay close attention to the
market and be ready to move as soon as your home’s value increases.
Increasing your home’s equity is a smart financial move, and there are a few ways you can
boost its value. Be aware of your finances before making any decisions, and it’s always a good
idea to talk to a professional. Your realtor or financial adviser can help you make the right