Getty Images
Home equity borrowing has been one of the most cost-effective ways to access large sums of money in the past few years. With credit card interest rates recently reaching a new record of 23.37% and interest rates on personal loans around 13%, it becomes clear why home equity loans and home equity lines of credit (HELOCs), both with rates in the single digits, may be the preferred alternative. And with the average home equity amount currently approaching $330,000, this may be the only way borrowers can secure a six-figure amount of money now.
But that $330,000 is just an average, with some homeowners having less equity in their homes with others having more. If you’re one of those owners looking to boost your equity going into 2025 and, thus, the amount you can potentially borrow, it’s worth exploring ways to do so now. Below, we’ll break down three ways that owners can boost their home equity levels in the new year.
Considering a home equity loan? See how much you could borrow here now.
3 ways to boost your home equity in 2025
Here are three effective ways homeowners can raise their already high home equity amounts to the next level in 2025:
Be strategic with your home projects
Not every home project and renovation is equally beneficial. Some, like kitchen renovations and the addition or improvement of bathrooms, can raise your home’s worth significantly more than others that are highly specific to the individual homeowner. So consider making the first sort of home projects while limiting (or skipping entirely) the latter ones. Fortunately, if you use a home equity loan or HELOC for IRS-eligible home repairs, you may qualify to deduct the interest paid on the product when you file your following tax return.
Learn more about using home equity for home repairs here.
Make bi-weekly mortgage payments
If you’re paying your mortgage monthly (12 payments a year), you’ll inevitably have less equity than if you moved to bi-weekly payments instead. Remember, home equity is calculated by deducting your current mortgage balance from your existing home value. So it behooves you to lower the former to boost your equity and paying on a bi-weekly basis can help do that.Â
By taking this approach, you’ll have some of your payments go straight toward the principal, reducing what you owe to your lender and the amount of time it would otherwise take to repay your mortgage. And, with many lenders, this is simple to do with a quick phone call to the bank in which you request a payment switch.
Explore refinancing options
Mortgage rates are high now and are pretty much in line with where they were earlier this year, before the Federal Reserve even started cutting interest rates. But for select homeowners (like those with mortgage interest rates of 7% or higher), it could be worth refinancing to secure a lower rate and payment. From there, homeowners should continue making their previous payments, even at the lower rate. By doing so, they’ll make a greater dent in their total mortgage balance, thus boosting their equity in the process. This isn’t an option for most or even many homeowners, but for those who qualify, it may be worth exploring.
The bottom line
Home equity loans and HELOCs are both effective tools for accessing your home equity. Before using either, however, it’s worth contemplating ways to boost that funding source even higher than what it currently is. By using one or more of the tactics above, homeowners can potentially increase their equity for 2025, giving them access to even more cost-effective funding to use in the years ahead.
Have more questions? Learn more about your home equity options online today.