6 ways your home equity can help you earn more money in 2025

The dramatic rise in home values over the past few years has created an unprecedented opportunity for homeowners to leverage their property’s equity. After all, millions of Americans are now sitting on substantial wealth tied up in their homes, with the average homeowner having about $330,000 in home equity right now, according to recent data.

For savvy homeowners, this stored wealth represents more than just paper gains — it’s also a potential springboard for increasing your earning power. Whether you’re looking to expand your income streams or invest in future wealth-building opportunities, your home equity can be a powerful tool, and tapping into it strategically can lead to considerable financial growth. 

Like any financial decision, though, leveraging your home equity requires careful planning and a clear understanding of the best uses for this type of borrowing. So, if you want to increase your earning potential with the help of your home’s equity, it helps to know how to harness your home equity to earn more money next year. 

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6 ways your home equity can help you earn more money in 2025

Using these strategies to leverage your home equity could boost your earning potential in the coming year.

Convert space into a rental unit

One way to earn more money in 2025 is to transform your home — or part of it — into a revenue-generating asset. In areas with high tourism or business traffic, short-term rentals can generate substantial income, so finishing a basement, converting a garage or creating an accessory dwelling unit (ADU) can pay off. But even if you live in a quieter area, marketing your space as a retreat or remote work destination can attract guests year-round.

And, the funds from your home equity are an easy and affordable way to finance these renovations. While the upfront costs can be substantial, the average home equity loan rate is just over 8% currently, making it one of the most affordable borrowing options available now. Plus, the potential for ongoing rental income can provide steady returns and help offset your mortgage payments. 

Find out how affordable the right home equity lending option could be.

Pursue advanced education or certifications

Investing in your education is one of the most effective ways to boost your earning potential. Whether you’re pursuing a master’s degree, professional certification or technical training, investing in your skills can lead to higher-paying job opportunities or new career paths.

While student loans are a common option for covering educational costs, using home equity to pay for your education typically means getting lower interest rates and more flexible repayment terms. This strategy can be especially advantageous if you’re transitioning to a high-demand field with strong earning prospects.

Invest in the stock market or mutual funds

For those with a higher risk tolerance, using home equity to invest in the stock market or mutual funds can yield significant returns over time. A lump sum from a home equity loan, for example, can allow you to take advantage of market opportunities or diversify your investment portfolio.

It’s essential to approach this option carefully, however — and with a full understanding of the potential downsides. Market investments come with inherent risks, so ensure you have a well-researched strategy and consider consulting a financial advisor. Done correctly, though, this approach can lead to substantial long-term growth.

Fund green energy improvements

As sustainability becomes a priority, many homeowners are turning to green energy upgrades like solar panels, energy-efficient windows and geothermal heating systems. These improvements not only reduce your energy bills but can also qualify you for tax credits and incentives.

In some cases, investing in renewable energy can even create additional income. For instance, homeowners with solar panel systems may be able to sell surplus energy back to the grid, depending on local regulations. Using your home equity to fund these upgrades can yield both immediate and long-term financial benefits.

Launch a small business or side hustle

If you’ve always dreamed of being your own boss, home equity can help make it happen. Many small business owners cite a lack of funding as their primary obstacle. By tapping into your equity, you can bypass the challenges of securing a traditional business loan and focus on building a sustainable source of income.

For example, a home equity line of credit (HELOC) or a home equity loan can provide the funds needed to cover startup costs, purchase equipment or market your new venture. So, whether you want to open a brick-and-mortar business, start an online store or dive into freelancing, the flexibility of home equity financing makes it a viable option.

Invest in rental property

Real estate remains one of the most reliable ways to generate passive income, and with nearly $300,000 in tappable home equity, you may have enough to make a down payment on a rental property. Whether it’s a single-family home, a duplex or a vacation rental, leveraging home equity to invest in real estate can be especially lucrative in 2025, as demand for rental housing continues to rise. Researching high-demand areas and understanding market trends will help ensure your investment pays off.

The bottom line

Your home equity is more than a number — it’s an untapped resource with the potential to transform your financial future. By strategically leveraging this asset, you can pursue ventures and investments that increase your earning potential in 2025 and beyond. Whether you choose to start a business, invest in real estate, or improve your skill set, though, careful planning and thoughtful execution will ensure your home equity works for you.