How to boost the equity in your home

When house prices are rising quickly, homeowners don’t have to give a lot of thought to boosting the equity in their homes.

As values increase, and they pay down their home loans, their equity can jump quite quickly. But when the market is slower, people have to work a bit harder. However, it is still possible.

Here’s what you can think about if you want to lift your equity. For many New Zealanders, it’s a key part of their net worth.

Pay off your loan

There are two main ways to boost equity: either you reduce the amount you owe on a property, or you boost its value. Paying off your loan more quickly will increase your equity if the value of your property is stagnant or increasing. Even if the value of your property is declining a little, if finances allow, you can pay off your loan at a faster rate to stay ahead of that – and put yourself in a better position when prices start to lift again.

Generally, the faster you pay down your debt, the more equity you will build. You can tackle your home loan by increasing your repayments or making a lump sum payment, subject to the terms and conditions of your lender and type of loan.

Carefully renovate

You might choose to increase your equity by boosting the value of your home. Well-chosen renovation work can make a big difference, particularly if yours is an older property that hasn’t had a lot of work done on it lately.

Often, the best return comes from work done on kitchens, bathrooms, and outdoor living areas. If you can create usable outdoor space where there wasn’t any before, that can make a big difference. If you’re able to create another bedroom, that can also boost your home’s value.

Don’t overcapitalise

While you’re doing your work, it is worth keeping an eye on what you’re spending. There can be a risk that you spend more than you recoup in value, especially when the market is slower. A way to avoid this is to look at homes nearby and what they are worth and selling for. You’ll probably see an upper limit, and you may be able to identify the things that make properties particularly stand out. You could ask local real estate agents what they see boosting the value of homes in your local area.

Get a new valuation

If it’s been a while since you’ve had a valuation done, or you’ve done work to improve your property’s value, you can have it revalued. You can do this through online or desktop services, but if you’ve done a significant amount of renovation, it might be worth having a professional valuer come out to assess your property. You may well find that the valuation comes in higher than you expect, boosting your equity instantly.