How to build equity in a home

Home equity means true ownership. It’s the amount of your house that you own outright rathan than what you owe to your lender. When you make monthly mortgage payments, which reduce the amount of your loan that you owe, and your home appreciates over time, your equity grows. If you’d like to speed up this process, there are steps you can take to build your equity faster.

In this article we’ll explore methods to increase your stake in your home so you can make the choices that make sense for you in your unique situation.

What does it mean to build home equity?

Home equity is the difference in the value of your home and the amount of money you owe on your mortgage or other loans secured by the home. Put another way, it’s the amount of money you could expect to make after you sell your home and pay off your mortgage before paying any of the costs related to selling.

For example, if the value of your home is $200,000 and you owe $150,000, your equity is $50,000.

When you build equity, it means that you increase the difference between your home value and the amount you owe on your mortgage. You can do that by increasing your home’s value or decreasing the amount of money you owe on your mortgage.

For example, if you made extra mortgage payments on your $200,000 home and you now owe $145,000, you would have $55,000 in equity. You increased your equity by $5,000.

Why is building equity important?

Building home ^eq2uity is important for a few reasons:

• Sell your home at a larger profit. The more equity you have in your home, the more cash you can pocket when you sell your home after paying off your remaining mortgage balance.
• You can borrow against your home. You can use a home equity loan¹ or line of credit to borrow money at a relatively low interest rate. The more equity you have, the easier it is to get these loans and the more you can borrow.
• It makes refinancing easier. The more equity you have, the less risk lenders have to take on when offering you a mortgage. If you have more equity, it will likely be easier to refinance your mortgage.²

6 ways to build equity in a home

There are many ways you can start building equity in your home. Some happen automatically as you pay off your loan and maintain your home, while others involve more proactive action.

1. Make on-time payments

The easiest way to build equity in your home is to make on-time payments toward your mortgage. With each monthly payment, you’ll reduce your mortgage balance by a small amount. Over time, your loan balance will fall, and your equity will rise.

As the loan amortizes, more of each payment will go toward principal, and less will go toward interest. That means your loan balance will fall faster and faster as time passes, accelerating your equity gains. You can use Rocket Mortgage’s amortization calculator to see how your loan will amortize.

2. Home improvements

Making updates and adding certain amenities can help increase your home’s value. Energy-efficiency updates can also increase the value of your home. It can also save you money on utilities and could provide a tax credit.

3. Make biweekly payments

Another way to boost your home equity is to use different strategies to pay down the loan more quickly. One such strategy is to switch to making biweekly mortgage payments. Because there are 52 weeks in the year, this means you make 26 half payments or, in effect, 13 monthly payments each year rather than just 12.

That one extra monthly payment per year will reduce your loan balance and help you build equity more quickly.

4. Make a larger down payment

The more you can offer as a down payment, the less you have to borrow to purchase your home, and the more equity you start with when you buy the home. For example, if you make a 10% down payment instead of a 5% down payment, you’ll start with twice as much equity.

As a bonus, larger down payments may let you avoid additional costs, like private mortgage insurance. You can put the money that would have gone toward those costs toward paying down your loan’s principal, further boosting your equity.

5. Shorten your loan term

Mortgages tend to come with one of two terms: 15 years and 30 years. The term of a loan is the amount of time it will take to pay the loan off by following the default payment schedule.

With a shorter loan term, you’ll have to make larger monthly payments, but you’ll pay off the loan more quickly, accelerating the speed at which you gain equity. You can consider refinancing your mortgage to one with a shorter term if you’re looking to gain equity fast.

6. Lower your interest rate

The lower the interest rate of your loan, the less you have to pay in interest each month. That lowers your required monthly payment. If you put the money that would have gone toward interest toward your loan’s principal, you can build equity more quickly.

If you have a mortgage and rates drop, you can consider refinancing to lower the loan’s rate. Keeping up with your old payments will help you build equity fast.

Accessing your equity

You don’t necessarily have to sell your home to use your equity. You could also borrow against the equity in your home through a home equity loan.

This loan acts as a second mortgage that allows you to borrow from your equity and use your home as collateral. That means if you don’t pay the loan back, you could lose your home. When you’re approved for a home equity loan, you receive your money in one lump-sum payment.

Home equity loans can be helpful for all sorts of things, such as consolidating credit card debt at a lower rate, investing in improving your home or buying a second one, or funding an education.

You can find out more about the Rocket Mortgage^® Home Equity Loan to see if it’s right for you. A cash-out refinance is another way to access your home equity. Though Rocket Mortgage^® does not offer home equity lines of credit (HELOCs) they can also be a flexible way to access your equity.

The bottom line: Building equity is a good investment

For many homeowners, their house is their largest financial asset, but they have substantial mortgage debt. Building equity, which represents the portion of your home you own outright, is an important step toward maximizing your home's potential as a wealth-building tool.

While equity naturally accumulates as you make regular mortgage payments, you can take steps to speed up this process. Options like refinancing when you can reduce your interest rate or planning for a biweekly payment schedule can help you build equity faster and reduce the total interest paid over the life of your loan.

When you've accumulated equity and want to use it, you can reach out to Rocket Mortgage^® to see what terms and rates you qualify for.

¹ Home Equity Loan product requires full documentation of income and assets, credit score and max loan-to-value (LTV), combined loan-to-value (CLTV), and home equity combined loan-to-value (HCLTV) ratios. Requirements were updated 11/19/25 and are tiered as follows: 680 minimum FICO with a max LTV/CLTV/HCLTV of 80%, 700 minimum FICO with a max LTV/CLTV/HCLTV of 85%, and 740 minimum FICO with a max LTV/CLTV/HCLTV of 90%. Your debt-to-income ratio (DTI) must be 50% or below. Valid for loan amounts between $45,000.00 and $500,000.00 (minimum loan amount for properties located in Michigan is $10,000.00). Product is a second standalone lien and may not be used for piggyback transactions. Product not available on Ameriprise products. Guidelines may vary for self-employed individuals. Some mortgages may be considered “higher priced” based on the APOR spread test. Higher priced loans are not allowed on properties located in New York. Additional restrictions apply. This is not a commitment to lend.

² Refinancing may increase finance charges over the life of the loan.