How to grow your home equity quickly
With stubborn inflation and uneven stock market performance, many Americans are experiencing economic pain. In this environment, alternative ways to help make ends meet may need to be explored.
This can include the use of credit cards or personal loans. For homeowners with equity in their house, it could mean using a home equity line of credit (HELOC) or home equity loan. Both options allow owners to utilize the equity they've built in their homes as they see fit. Many homeowners use these options to make major household repairs or renovations, but they can also use them to finance major expenses like a wedding or school tuition.
To get the most out of a HELOC or home equity loan, owners should build as much equity as possible. Many lenders will let you withdraw as much as 85%, so the more you have, the more you can access. To get to that point, it helps to know how to boost your home equity as quickly as possible.
If you think you could benefit from taking out a HELOC, start exploring your options here now.
How to grow your home equity quickly
Homeowners can boost the equity they have in their homes in multiple ways. Here are three reliable ways to grow your home equity quickly.
Make bi-weekly mortgage payments
Many people pay their mortgage once a month for a total of 12 full payments per calendar year. But homeowners looking to boost their home equity quickly should instead switch to a bi-weekly payment schedule. By doing so, they'll make half their monthly mortgage payment every other week, resulting in 26 half-payments (or 13 full ones) annually. These extra payments add up fast, shaving years off the top of your mortgage loan (approximately six to eight, depending on how much you pay). They also boost your equity and save you money on the interest you otherwise would have paid during those extra years.
By making bi-weekly mortgage payments, you'll also put yourself in the running for a more substantial home equity loan. Explore your home equity options here to see how much you can withdraw.
Make home improvements
If you make substantial home improvements or renovations to your home, you can potentially grow its worth. That extra value will be reflected in your equity and how much you can get with a HELOC or home equity loan.
Remember: Home equity isn't just the amount of money you've paid toward your mortgage. It also includes any extra value your home has taken on in recent years. Let's say your initial mortgage was for $500,000. Since then, you've paid $50,000 toward the principle and have made improvements that raised your home's value to $600,000. In this case, you have $150,000 in equity ($600,000 - $450,000), not just $50,000.
So consider making major home repairs and improvements to quickly boost your home's equity. If used for IRS-approved reasons, you may even be able to deduct the interest you paid on a HELOC or home equity loan come tax season.
Use your tax refund
If you haven't yet filed your tax return for 2022, you can do so today by using an online tax preparation service. But if you're one of the millions who have already filed - and have since received a direct deposit - you may be wondering what to use the extra money for. How about using it to pay down your mortgage? Every extra dollar helps (hence the bi-weekly payment schedule). If you can afford to part with your refund, it may be worth doing if it can knock off some interest and principle from your mortgage loan (and thus grow your equity).
The bottom line
HELOCs and home equity loans can be smart and cost-effective ways for homeowners to make ends meet. To get the most out of these credit options, however, it helps to have as much equity as possible in your home. To grow home equity quickly, owners should consider making bi-weekly mortgage payments to pay down their balance faster. Home improvements could also raise the home's value (even if the mortgage payments to date haven't made much of a dent). Finally, those who are expecting (or recently received) tax refunds should consider using the extra money to pay down their home loan and grow their home equity.
