Home equity: Small ways to improve the value of your home

Your home is a major investment. By making targeted improvements, you can increase its value with relatively little upfront cost.

Tags: Credit, Home, Home equity, Home improvement, Loans
Published: April 16, 2020

Your home equity is likely one of the biggest financial assets you have. Did you know there are small steps you can take right now to increase the value of your home?


What is home equity?

What is home equity? It’s easy to calculate. The equity you have in your home is the amount the home is worth, minus the amount you owe on your mortgage.

For example, if your home was recently appraised for $200,000 and you still owe the bank $150,000 on your mortgage, you would have $50,000 in equity. 

As you make your monthly payments to the bank, the amount you owe slowly goes down and so your equity gradually increases. But, there’s a catch. If anything causes your home to increase in value, your equity grows.


How to increase the value of your home

Home improvement: While not all projects will add value to your home, those projects that increase the size or living space available to potential purchasers will likely raise the value of your home. Some ideas to consider:

  • Add square footage
  • Finish your basement or attic  
  • Create another legal bedroom by putting in an egress window
  • Add a closet under the stairs

Landscaping: Particularly if you’re thinking of selling soon, curb appeal is crucial. A positive first impression can affect how much a buyer is willing to pay for your home. Make sure these are done well:

  • Well-maintained grass or groundcover
  • Trimmed bushes and no dead plants
  • Pavers or borders around flowerbeds
  • Keep features like fountains or swimming pools clean and well-cared-for

Common mistakes

It’s easy to get excited about a home improvement project, but remember that not every project will increase your home’s value. If you have an eye on equity, steer clear of these issues:

  • Intricate details. While you might appreciate fine, detailed woodwork on a new banister, be aware that potential buyers likely won’t pay a premium for it.
  • Overly personal improvements. If you want a bright pink bathroom, you’re likely the only person who appreciates it. While you might love the change, it can be a turnoff to buyers and potentially decrease your home’s value.
  • Expensive materials. It’s tempting to always go for the best, but if you do, you’ll see a limited return on investment. Consider: A ceiling fan is just a ceiling fan; no reason to overpay for it.
  • Out-of-character changes. If you’re doing a major renovation, make sure that it respects the architectural integrity of your existing structure. You want an add-on to look natural — not turn your home into a mish-mosh of styles.

Remember basic maintenance

Putting on a new roof, updating appliances as needed and making sure the plumbing is in good working order won’t increase the value of your home. Those parts of the house are expected to work, and work well — your home needs to be livable year-round.

However, just because maintenance isn’t directly increasing the value of your home, if neglected, it can certainly cause problems. A home with a leaky roof or a perpetually broken plumbing line is worth far less. So, stay on top of the basics, even as you make your targeted improvements.


There’s lots more to learn about what home equity is and how you can leverage it, so continue reading for more information about home equity loans and lines.