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6 Ways to Build More Equity into Your Home 

When you’re a homeowner, building equity into your property is one of the best ways to take control of your investment. This gives you power when you sell your home, and you can use the money to buy another residence, take out a loan, or achieve greater financial independence.

According to the Houston property management firm Green Residential, there are two ways to build equity into a home: increase the property’s value or reduce what’s owed on it. “If you want to speed up the process of building equity, you can’t be passive,” an article on the site states. “You have to proactively attack each side of the equation.” 

Green Residential’s team recommends taking a series of steps to increase equity in your home and gain greater financial control of the property. Some of those tips are included among the six items in the following list.

1. Double Your Principal Payment

If you choose to concentrate on going the route of reducing what you owe, focus on increasing your payments toward the principal loan amount. If you can double this amount, you could pay off your loan in half the time and thus manage to pay significantly less interest over the long run.

If you make extra payments, mark them to go toward your principal. Many costs are likely escrowed into your loan payment, such as property taxes, private mortgage insurance, and interest. Make sure your extra payment does not go to any of these other payments.

2. Focus on Maintaining the Value

Maintenance is a necessary part of maintaining the value in your home. It won’t necessarily add to it, but it prevents the value from collapsing. 

Necessary maintenance includes roofing repairs, replacing water-damaged drywall, painting, fixing wood rot, repairing foundation damage, updating deteriorating siding, and similar items. You might not be able to add any extra to the asking price when it’s time to sell, but the home will show better, and it won’t lose value as the market increases.

3. Refinance to a 15-Year Loan

If you’ve built some equity into your property already, you have good credit, and you enjoy a low debt-to-income ratio, you may qualify for a 15-year loan refinance program. This is easily one of the best ways to build equity into your home quickly, because it doubles your mortgage payment and cuts your long-term interest.

Many banks don’t like to offer a 15-year mortgage because they earn less interest on your loan, so they tend to have higher qualifications for this type of loan. You may have to shop around to find a good lender, but this is a great move for your property.

4. Make Value-Adding Renovations

If you have the funds, make smart renovations to the property. Not all upgrades will add value. For example, a firepit in the backyard, a swimming pool, and a new HVAC system are all wonderful to have, but they won’t increase your home’s appraisal value.

The best renovations to consider for greater equity include: 

  • A minor bathroom remodel
  • Kitchen upgrades 
  • New windows 
  • A new roof or siding
  • Landscaping 
  • Additional square footage 
  • An extra bathroom or bedroom 
  • Attic or basement bedroom conversions 
  • Refinished or remodeled basement 

These renovations go beyond maintenance and increase the quality of a home; therefore, people will pay more for it. 

5. Apply Windfalls to Your Home Loan 

Any time you receive a cash windfall, think about devoting it all, or a large portion, to what you owe on your mortgage principal. A windfall might be a tax return, a bonus from work, legal settlement, or an inheritance. 

Unless you plan to make another promising investment with the cash, putting it toward building equity in your home is a simple and high-impact way to increase your earnings in the long run.

It will significantly decrease what you pay in interest and make the sales check so much sweeter when you sell.

Be Patient 

For many homeowners, there’s not much more to be done than wait patiently for your home’s value to rise. The longer you own the property and take care of it, the more it will be worth when you sell. 

This is a huge incentive for purchasing a home in a fast-paced market or holding on to your residence for just a little longer. If homes are selling quickly in your area, this will drive up prices significantly.

When you’re ready to sell, watch the market closely, and don’t sell until the market starts to slow down–this will ensure you get a higher price for your home.