My Husband and I Used This Mortgage Trick to Build Home Equity Sooner

The home my husband and I own today is by no means a mansion. It's a modest but comfortable home with a nice-sized basement. But the first home we owned was a true starter home. It was considerably smaller and offered roughly half the square footage we have today.

Because our first home wasn't as large or updated as our current home, it came with a fairly low mortgage payment each month. That was due in part to the fact that we'd borrowed less, and also, due to the fact that we were able to lock in a pretty low mortgage rate on our loan.

My husband and I knew that building equity in our starter home would give us more options for upsizing down the line. And so we made one key move that allowed us to build equity faster.

When you double up on your payments

The monthly payment on our old house was less than half of what our current mortgage payment amounts to. At the time, that payment was very affordable to us and left us with a lot of extra income. So we decided to get into the habit of making a double payment on our mortgage each month.

In fact, we had our old mortgage set up to autopay, and so what we did was double the amount of the payment so it would happen automatically. That way, it was just part of our budget and we wouldn't be tempted to spend that extra money elsewhere.

Making double payments on our mortgage for a few years made it so that when we were ready to upsize to our current home, we had a nice amount of equity to tap. That, combined with money from our savings, allowed us to put down about 50% of our home's price at closing, minimizing the amount we had to borrow.

Should you start making double payments on your mortgage?

If your goal is to build equity in your home sooner or pay off your mortgage ahead of schedule, then making double payments like we did makes sense. But if that's not doable, don't sweat it.

I don't remember the exact mortgage rate we had on our starter home, partly because it was a long time ago and partly because our rate was adjustable. But I can say that it was way lower than the average 30-year mortgage rate today, which is 6.71%, according to Freddie Mac. If you're stuck with a higher mortgage rate, it means you may be facing higher payments that are difficult to double.

You may also want to stick to your regular payments if you happen to have a very low interest rate on your mortgage, which may be the case if you signed your loan in 2020 or 2021, before rates started to climb. In that case, it could make more financial sense to invest your money rather than pay down a loan with an interest rate around just 3%.

But if your goal is to build home equity sooner, then paying extra into your mortgage is a good bet. And remember, you don't have to commit to a double payment like we did. Boosting your monthly payments by even $100 or $200 a month could go a long way toward building equity, so if that's what you can afford, do that. You don't want to strain your budget in an effort to build that equity sooner and risk falling behind on other bills in the process.