If you’re like many homeowners, your house is the place where you can work, relax, eat and sleep, help your kids with their schoolwork and host your Zoom happy hours. But your home is also one of the best places for building wealth, and the way to do this is by increasing the equity you own in your house.

What is home equity?

It’s the portion of your home you own when you subtract the balance on your mortgage from the home’s current market value. Let’s say your house is worth $300,000 in today’s market and you owe $200,000 on your mortgage: $300,000 – $200,000 = $100,000. The resulting 100 grand is your home equity.

Building equity typically happens in two ways; you can either decrease your mortgage debt or increase your home’s value. Here are a few options for doing either — or both. Pick one or more suggestions and you may be on the way to growing your wealth!

Decrease Your Mortgage Debt

1. Make a big down payment

Your down payment kick-starts the equity you build over time. Depending on your payment assistance eligibility and available lending programs, you  could put down as little as 3 percent or even pay nothing down — but putting down more will instantly boost your equity.

Bonus: if you can put down at least 20 percent, you’ll also avoid paying private mortgage insurance, or PMI.

2. Pay more on your mortgage

Most mortgages are on an amortization schedule, meaning you make payments in equal installments over a set period of time until the loan is paid off.

  • Fastrack your loan by switching to biweekly mortgage payments. Split your mortgage payment in half and send each half every two weeks instead of once at the end of the month. This adds one extra payment to your mortgage every year, which can ultimately shorten your loan term and save you a pretty penny in interest over the life of the loan.
  • Add a certain amount each month. Check your budget to see how much extra you can realistically put toward your monthly mortgage. For example, if you just paid off your car loan, consider putting that extra $250 you’ve saved toward your mortgage every month.
  • Use occasional extra money. Anytime you receive a tax refund, bonus at work or cash gift, put it toward your mortgage balance.

3. Refinance to a shorter loan term

A shorter loan term can have two main benefits: You typically get a lower interest rate, and more of your mortgage payment goes toward the principal each month. A 15-year mortgage from the start helps you build more equity every month than you would with a 30-year mortgage.

Increase Your Home’s Value

In addition to paying down the amount owed on your home, you may also be able to build equity faster by increasing its current value. Here are five improvements you can make that could help do just that.  

4. Make the outside more attractive

According to the Appraisal Institute, how your home looks from the street — its curb appeal — can impact its value by as much as 13 percent. Make sure existing landscaping is clean and well-maintained. If your yard seems dull in comparison with your neighbors, consider planting flowers, switching out your light fixtures or repainting the front door.

5. Choose the best interior areas to upgrade

Once the exterior looks good, focus on the kitchen and bathroom. When these two rooms are outdated, they can keep a property from reaching its highest valuation. According to Remodeling Magazine’s 2020 Cost vs. Value report, the average home remodeling project provides a 64 percent return on your investment.

Bonus: you’ll probably enjoy living in the house more. According to a National Association of Realtors report, 74 percent of homeowners had a greater desire to be in their homes after completing a remodeling project.

6. Make your house low-maintenance

Home buyers worry about buying a home that will need constant maintenance, so replacing a major component before putting it up for sale — like the furnace, water heater or even the roof — may calm fears of an emergency repair in the near future and help get you a higher price. Improvements that make things easy to clean and maintain may also increase home value. Consider replacing easily stained carpet with hardwood floors or replace high-maintenance wood siding with vinyl siding.

7. Make it more efficient

Energy conservation, “smart” technology and sustainability features can have a significant impact on home value. Energy-efficient lighting, smart appliances, water-conserving plumbing and solar panels can add value and make it easier to sell your house for a higher price.

8. Make it bigger

Price per square foot is how realtors help clients compare homes that are similar in style and upgrades. Bigger homes can often command higher values during an appraisal. Adding a room is the obvious way to make your house bigger, but you can also create additional living space by finishing the basement or building a deck.

Are you on a tight budget? Check out our budget-friendly home improvements list to maintain your home’s value.


You can also just wait for your home value to rise. Local housing markets fluctuate but over time, home values have gone up. In 2020, median listing prices grew 13.3%, according to Realtor.com. Even if that rate of growth decreases, the value of your home naturally rises when home prices grow and demand increases. You can’t control the market but you can check your home’s value using an online home price estimator like Zillow’s Zestimate, Redfin’s Home Evaluator, Rocket Homes Evaluator or by consulting a professional appraiser.

For more information on how to build home equity or for answers to any questions you may have about home ownership, check out our resources at efirstbank.com or stop by one of our branches to speak to a FirstBank representative today.

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