How to Build Home Equity Faster

Buying a home gives you more than just a place to live. It’s also a tool for building wealth over time through home equity. You can tap into your home’s equity when you sell the property or when you borrow against your residence. Increasing your equity is a smart financial move because it gives you more flexibility over time.

Discover what home equity is and how to build home equity faster.

What is home equity?

Home equity represents the portion of your home that you own without debt. It’s the gap between what your home is worth and what you still owe on it.

You can calculate your equity by subtracting your remaining mortgage balance from the current market value of your home:

Home equity = [your home’s value] - [remaining mortgage balance]

If your home is worth $400,000 and you owe $250,000 on your mortgage, you have $150,000 in equity.

If the market value increases or you pay extra toward the balance, your home equity is likely to rise faster.

How to build home equity faster

There are no shortcuts to building home equity overnight. Instead, you can make several smart decisions consistently to speed up the process.

Make a larger down payment

Your lender orders an appraisal of your home as part of the homebuying process. If you make a low down payment, or none at all, with eligible mortgage programs like USDA or VA, you’ll have very little equity. On the other hand, putting more money down gives you the chance to build equity in your home as soon as you close.

Imagine you qualify for a USDA loan and use it to buy a $400,000 home. If you put zero down, as USDA mortgages allow, you would have virtually no equity on closing day.

On the other hand, if you put 10% down — or $40,000 — toward the purchase price, you would have about $40,000 in equity from the moment you close. That’s because the home appraised at $400,000, but you financed only $360,000.

You’ll also avoid paying interest on the amount you didn’t borrow. Paying less interest will help you build more equity over time. Think of a larger down payment as a jumpstart on the equity-building process.

Make extra mortgage payments

One of the fastest ways to increase equity is to pay extra toward your mortgage principal. Early in a mortgage, the majority of your payments go toward interest because the loan is amortized. However, you can pay extra toward the principal each month to lower your loan balance sooner.

There are a few ways to go about it: You can round up your mortgage payment, or make a separate principal-only payment as your budget allows.

For example, if your mortgage payment is $1,820, you could round up to $2,000, meaning you’d pay an extra $180 toward principal every month. While that might not sound like much, it adds up to more than $2,000 a year in extra principal payments.

Another option is to pay your mortgage biweekly, which allows you to add an extra full payment each year while lowering the interest that accrues between payments.

Refinance to a shorter loan term

Refinancing from a 30-year term to a 15-year mortgage usually increases the portion of each payment that goes toward principal. Although your monthly payment will be higher, you’ll pay off your mortgage much sooner and accumulate equity at a faster pace. A shorter loan term also reduces the total interest you pay over the life of the loan.

Before switching to a 15-year mortgage, make sure you can handle the higher payment amount. Consider talking with a financial advisor or other professional for guidance specific to your situation, and compare rates and payment options across lenders. If you’re concerned about consistently making the payment, it may be best to stick with the 30-year mortgage and pay extra as your budget allows.

Run the numbers → Use Kikoff’s mortgage refinance calculator to see your new payment, total savings, and month you’d come out ahead.

Make home improvements that increase value

Not every renovation will increase your home’s value. However, investing in projects that make the property more appealing to prospective buyers can drive up the value and increase equity.

Here are the top projects to consider based on national averages and estimated return on investment, according to the Journal of Light Construction’s 2025 Cost vs. Value Report^[1]:

• Garage door replacement
• Upgrading or adding a bathroom
• Window replacements
• Kitchen remodel
• HVAC conversion

Choose high-value improvements that will help you build equity while making it easier to sell, if you decide to list it in the future.

Avoid taking on new debt against your home

In most cases, taking out a loan or line of credit that uses your home as collateral erodes its equity. This includes:

• Home equity loans
• Home equity lines of credit (HELOCs)
• Cash-out refinancing

Borrowing against your home sometimes makes financial sense, especially if you’re dealing with a financial emergency or need to cover a major renovation. However, carefully consider the risks versus benefits, especially if you think you might sell your home in the next few years.

Using that equity now means less profit in the future if you sell. Compare your options carefully and only borrow what you need to, if you decide to borrow against your home at all.

Wait for property values to rise (and avoid overpaying)

You can’t control the housing market, but you can be patient when purchasing a home during a seller’s market. When home values rise quickly, there is always a risk of overpaying. Shop around and don’t rush, as you could end up with little to no equity in your new home.

Purchasing a home at a reasonable price gives you more room for appreciation over time. Your equity can rise as demand grows in your neighborhood and property values increase.

While appreciation helps, don’t rely on it alone to build equity. Use the other methods to build equity faster and turn your home into your most valuable asset.

Why your credit score matters for building equity

Your credit score doesn’t directly increase your home equity, but it plays an important role in how quickly you build it. If you have a higher credit score, you can often qualify for a lower mortgage rate, which means lower interest costs overall. Lower interest allows more of each monthly payment to go toward principal.

If you’re preparing to buy a home or want to refinance your existing home in the near future, using tools that report positive payment history can help build your credit. Kikoff’s Credit Account is a free tool that reports your on-time payments to the major credit bureaus, helping you to build the credit history lenders look for.