How to Build Equity in Your Home Faster

There’s an ongoing argument as to whether homeownership is truly an asset or not. While some say your primary residence is not an actual asset, this becomes more and more false as you start to build more equity.

Equity represents the percentage of the home that you own outright. For example, if you own a $250,000 home and you owe $150,000 on your mortgage, that means you have $100,000 in equity (the amount you don’t owe).

You can liquidate your equity by borrowing against it or selling your home and making a profit. That said, homeownership can really be an asset if you have enough equity in your home.

That leaves us with the question: How do you build equity in your home faster?

Here are a few options to consider.

Make a Larger Down Payment

If you make a down payment of at least 20%, you’ll avoid private mortgage insurance but this also means that you will have at least 20% equity in your home starting out. Of course, you can buy a home with a smaller down payment, but that will mean you’ll start with less equity.

Not putting enough down on your home can put you in a dangerous place financially, so it’s important to buy a house that you can truly afford.

It may pay off to delay buying a home until you can round up a large enough down payment. Set a savings goal that seems reasonable to you then break it down to determine how much you need to set aside each month. Use windfalls, bonuses, and side hustle income to help you build a larger down payment faster.

RELATED: 5 Ways to Save a Down Payment for Your First Home

Make Extra Mortgage Payments

Even if you can’t put make a larger down payment, you should always buy a home that’s in your budget. That way, you can avoid becoming house poor and having all your expenses tied to your home.

One of the benefits of not being house poor is having enough money in your budget to make extra mortgage payments. When my husband and I first bought our home, I was disappointed to see so little money actually go toward our principal balance. Your mortgage payment covers interest, taxes, homeowner’s insurance, and finally your principal.

We started rounding up our mortgage payments in the first year. Then, we played around with the idea of making extra payments each month. By running some numbers I realized that if we just put an extra $200/month toward our mortgage, we could shave 9 years off our 30-year loan, save $54,000 interest, and build equity faster.

You can consider making extra payments each month too even if you start with $50. Another thing you can do is switch to bi-weekly mortgage payments. If you get paid every 2 weeks, you will have some months where you get 3 paychecks. The extra money from those additional paychecks can help you build equity faster.

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Increase Your Home’s Value

This is another thing you can do to build equity faster as a homeowner. I often feel like the list of home maintenance and repair is never-ending. It’s also enjoyable to fix our home up and it makes us feel accomplished to see the new updates.

Simple changes like upgrading your appliances, installing new windows, or changing your carpet or flooring can add value to your home. As the value of your home increases and the balance you owe on your mortgage decreases, you’ll start to gain more equity.

Here are just few home upgrades that can increase the value of your house.

  • Remodeling the kitchen
  • Upgrading the bathroom (new light fixtures, tile flooring, bathroom vanity, etc)
  • Landscaping projects
  • Painting the walls or exterior
  • Installing energy-efficient appliances
  • Bathroom addition
  • Deck addition
  • Energy-efficient insulation

The list goes on and on. One thing we like to do is set money aside each month for home updates and maintenance. Again, this is another reason why it’s important not to buy a house that you can’t afford to maintain.

RELATED: 5 Ways to Increase the Value of Your Home

Refinance to a 15-year Mortgage

This is something you may consider doing to build equity faster in your home. A shorter loan term means more of the money can go toward the principal balance and not interest.

However, refinancing your mortgage can get costly since you’ll have to pay closing costs and other fees. It’s important to look at your break-even point to determine when you’d actually save money from the refinance. For most people, this is usually between 2-4 years. If you don’t think you’ll stay in your home that long, it may not make sense to refinance it and you may just want to continue making extra mortgage payments for the time being.

RELATED: How and Why to Consider Refinancing Your Mortgage


If you want to build more equity in your home faster, you’ll have to start viewing your home as a potential investment for the future. Even if you don’t plan to live their forever, you’ll want to keep up with maintenance and build equity.

You can still prioritize savings and investing in other vehicles. However, your home can also be added to that mix and help you build wealth when you do it the right way.