# How can I increase my home equity? By Jean Folger | 2022-09-07 > Home equity is typically defined as the difference between your home’s value and your mortgage balance. Increasing it can help you build wealth and provide a cash resource when you may need it. ## Key Takeaways ## Key takeaways  - Home equity can grow over time and help you build wealth.  - Equity can change as you pay down your mortgage, and as home values fluctuate.  - To boost home equity, you can make a larger down payment, make larger or more frequent mortgage payments, refinance to a shorter loan term, or complete home improvements. **Meta description:** Learn 7 proven ways to increase your home equity — from extra mortgage payments to high-ROI home improvements. Build equity faster and grow your wealth. > **Quick answer:** You can increase your home equity by making extra mortgage payments, investing in high-ROI home improvements, making a larger down payment, refinancing to a shorter loan term, switching to biweekly payments, avoiding unnecessary cash-out refinancing, and letting market appreciation work over time. The fastest methods involve paying down your principal balance ahead of schedule. Home equity — the difference between your home's market value and what you still owe — is one of the most powerful wealth-building tools available to homeowners. Whether you want to build equity faster for a future sale or simply strengthen your financial position, there are both active and passive strategies to increase your home equity starting today. [Get your offer](#) ## What is home equity and how does it grow? The formula is simple: **Home Equity = Market Value − Mortgage Balance.** Your equity increases whenever your property value rises *or* your loan balance drops. Here are seven of the most effective ways to accelerate that growth. ## 1. Make extra mortgage payments One of the most direct home equity building strategies is paying more than your minimum monthly amount. Early in your mortgage, the majority of each payment goes toward interest rather than principal. Extra payments go straight to principal, which builds equity faster. ### How paying extra on your mortgage builds equity Consider this example: on a $300,000 mortgage at 7% interest, paying an extra $200 per month could build over $15,000 in additional equity within the first five years — and shorten your loan term by roughly four years. Even occasional lump-sum payments from tax refunds or bonuses make a meaningful difference. Just confirm with your lender that extra payments are applied to principal, not future interest. ## 2. Switch to biweekly payments to build equity faster If you want to build home equity faster without dramatically changing your budget, biweekly payments are a simple strategy. Instead of making 12 monthly payments per year, you make 26 half-payments — which equals 13 full payments annually. That one extra payment each year can [shave roughly four years off a standard 30-year mortgage](https://consumer.ftc.gov/articles/mortgages#biweekly) and save tens of thousands in interest. Many lenders and third-party services offer biweekly payment plans at little or no cost. ## 3. Make a larger down payment If you're still in the buying phase, one of the most straightforward ways to increase equity in your home is starting with a larger down payment. Putting down 20% or more gives you instant equity, eliminates the need for private mortgage insurance (PMI), and lowers your monthly payment. Not sure what to budget? Learn more about [how much to save for a house down payment](https://www.opendoor.com/articles/how-much-to-save-for-house) or whether [5% is enough for a down payment](https://www.opendoor.com/articles/briefs/is-5-percent-enough-down-payment). ## 4. Invest in home improvements that increase equity Not all renovations are created equal. Strategic upgrades can significantly boost your home's market value — and your equity along with it. According to the [2024 Cost vs. Value Report from Remodeling Magazine](https://www.remodeling.hw.net/cost-vs-value/2024/), some of the highest-ROI projects include: - **Garage door replacement** — approximately 194% ROI - **Steel entry door replacement** — approximately 188% ROI - **Minor kitchen remodel** — approximately 96% ROI - **Manufactured stone veneer (curb appeal)** — approximately 153% ROI Cosmetic improvements like fresh paint, updated landscaping, and minor [repairs before selling](https://www.opendoor.com/articles/things-to-repair-before-selling-a-house) can also raise your home's value without a major investment. For more ideas, explore [home improvements that increase value](https://www.opendoor.com/articles/improvements-that-increase-home-value) or learn whether [a new roof increases home value](https://www.opendoor.com/articles/does-a-new-roof-increase-home-value-roi-costs-and-what-sellers-need-to-know). If budget is a concern, here are [ways to finance your renovation project](https://www.opendoor.com/articles/eight-ways-to-finance-your-home-renovation-project). **A word of caution:** over-improving for your neighborhood can mean you won't recoup the full cost. Always compare renovation costs against the potential value added. ## 5. Refinance to a shorter loan term Switching from a 30-year mortgage to a 15-year term means higher monthly payments, but dramatically more of each payment goes toward principal. You'll build equity at a much faster rate and pay significantly less total interest over the life of the loan. This strategy makes the most sense when interest rates are favorable and your budget comfortably supports the higher payment. Run the numbers carefully before committing. ## 6. Avoid cash-out refinancing and HELOCs when possible A cash-out refinance or home equity line of credit (HELOC) lets you borrow against equity you've already built — but it also reverses your progress. Each dollar borrowed increases your mortgage balance and reduces your equity. If you do tap your equity, consider using the funds only for value-adding purposes, like a high-ROI renovation. Borrowing against your home to fund depreciating expenses can set back your equity-building goals by years. ## 7. Let market appreciation work for you Not every equity strategy requires active effort. Over time, rising home values in your area naturally increase your equity — without you spending a dime. According to the [Federal Housing Finance Agency](https://www.fhfa.gov/data/hpi), U.S. home prices have historically appreciated an average of 3–5% per year, though local markets vary significantly. The longer you stay in your home, the more appreciation you capture. To see where you stand, find out [how much your home is worth](https://www.opendoor.com/articles/how-much-is-my-house-worth-7-ways-to-find-out-your-homes-value) or learn about the [factors that influence home value](https://www.opendoor.com/articles/factors-that-influence-home-value) in your area. ## What factors affect your home equity? Understanding what drives equity helps you focus your efforts: **Factors you control:** - How much extra you pay toward principal each month - Home improvements and maintenance - Your loan type and term length **Factors you don't control:** - Local housing market conditions - Interest rate environment - Neighborhood development and amenities Monitoring both sides of the equation helps you make smarter decisions. You can start by [determining your home's current value](https://www.opendoor.com/articles/how-to-determine-home-value). ## The bottom line Building home equity is one of the most reliable paths to long-term wealth. Whether you make extra mortgage payments, invest in high-ROI improvements, or simply give your home time to appreciate, every strategy moves you closer to a stronger financial position. Thinking about your next move? Learn [how to sell your house](https://www.opendoor.com/articles/how-to-sell-your-house) or find out [what your home is worth today](https://www.opendoor.com/articles/whats-your-home-worth-take-these-steps-to-find-out). [Get your offer](#) ## Frequently asked questions **What is the fastest way to build home equity?** Making extra principal payments — either monthly or as lump sums — is the fastest way to build equity because it directly reduces your mortgage balance. Switching to biweekly payments is another simple way to accelerate equity growth. **How much equity do I have in my home?** Subtract your remaining mortgage balance from your home's current market value. For example, if your home is worth $400,000 and you owe $280,000, you have $120,000 in equity. You can [estimate your home's value here](https://www.opendoor.com/articles/how-much-is-my-house-worth-7-ways-to-find-out-your-homes-value). **Do home improvements always increase equity?** Not always. High-ROI projects like garage door replacements and minor kitchen remodels typically add more value than they cost, but over-improving for your neighborhood or making highly personalized changes may not pay off at resale. **Does paying off your mortgage early build equity?** Yes. Every extra dollar applied to your principal reduces your loan balance, which directly increases your equity. Just verify with your lender that there are no prepayment penalties. **How long does it take to build significant home equity?** It depends on your mortgage terms, payment behavior, and market conditions. With a standard 30-year mortgage and no extra payments, it can take 10–15 years to reach 30% equity. Extra payments and market appreciation can speed this up considerably. **Is refinancing worth it to build equity faster?** Refinancing from a 30-year to a 15-year term accelerates equity building, but it increases your monthly payment. It's worth it if you can comfortably afford the higher payment and secure a competitive interest rate. **Does market appreciation count as home equity?** Yes. If your home's market value rises, your equity increases automatically — even without making extra payments. However, appreciation isn't guaranteed and varies by location and market conditions. **Should I use a HELOC to fund home improvements?** It can make sense if the improvements add more value than the amount borrowed. However, a HELOC reduces your current equity, so it's best reserved for strategic, [high-return renovations](https://www.opendoor.com/articles/improvements-that-increase-home-value) rather than cosmetic preferences. **How does a larger down payment affect my equity?** A larger down payment gives you more equity from day one, reduces your loan balance, lowers monthly payments, and often eliminates the need for PMI. Learn about [how much it costs to buy a house](https://www.opendoor.com/articles/how-much-does-it-cost-to-buy-a-house) to plan your budget. **Can I lose home equity?** Yes. Equity can decrease if your home's market value drops or if you borrow against it through a cash-out refinance or HELOC. Maintaining your property and staying informed about [local market factors](https://www.opendoor.com/articles/factors-that-influence-home-value) helps protect your equity over time. --- *Originally published at [https://www.opendoor.com/articles/briefs/how-to-increase-home-equity](https://www.opendoor.com/articles/briefs/how-to-increase-home-equity)*