In the third quarter of 2023, U.S. mortgage holders collectively held $17.2 trillion in home equity, according to the November 2024 ICE Mortgage Monitor report. This includes $11.2 million in “tappable” equity, or equity homeowners can borrow against without dropping below an 80% loan-to-value ratio. 

For homeowners, this translates to an average of $319,000 in total equity and $207,000 in tappable equity. Rising home prices provided this big pot of accessible cash and, for some, using it to upgrade their space could increase home values further — especially now that home equity loan and home equity line of credit (HELOC) rates have dropped steadily since their post-pandemic peak and are expected to fall further in the coming months. 

Taking out a home equity loan or a HELOC to fund improvements allows you to borrow at an affordable rate, and both HELOC interest and home equity loan interest may be tax-deductible if funds are used to improve a qualifying primary or second home. If you’re thinking about using some of your equity to improve your living quarters, though, there are some home improvement projects in particular that experts say could boost your home’s value. 

Compare today’s top home equity borrowing options online now.

3 strategic home projects that can boost your home’s value in 2025

The following home projects could pay off by boosting the value of your home in the new year:

1. Build an accessory dwelling unit 

If you’re hoping your home could bring in some extra cash, or if you want to make room for extended family and household help, adding an accessory dwelling unit could be the ideal upgrade for you. 

Andrea Saturno-Sanajna, a broker with Coldwell Banker Warburg, says that many localities are enacting legislation or creating programs to encourage the building of ADUs to create more affordable housing. In some cases, these programs even come with government funding to help cover the costs. However, even without this bonus, Saturno-Sanajna believes this is a project worth thinking about if it’s allowed in your area. 

“The ADU could be rented out for additional income or used for aging parents or college students to be near family while maintaining some autonomy, for au pairs, exchange students or carers, or even for income-generating, short-term holiday accommodation where permitted,” Saturno-Sanajna says. 

MyHome by Freddie Mac reports that ADUs increase your home’s value by as much as 35%, but they must fulfill certain requirements including having a kitchen, bathroom, and separate entrance. If you have the space and the equity available to create this type of dwelling, the payoff could be substantial.  

Learn what your best home equity borrowing rates could be today.

2. Increase your energy efficiency

With the growing threat of climate change and the rising cost of electricity, projects that improve your home’s energy efficiency should be top on your list in 2025, says Michael C. Weiner, an agent at Coldwell Banker Warburg. 

“Infrastructure changes that improve energy efficiency aren’t just helpful in boosting value but also can start paying for themselves from day one,” Weiner says. 

His suggestions included upgrading your windows, adding insulation or installing a smart thermostat. 

Weiner also recommends switching out older appliances with newer, more energy-efficient ones that can both give your home an updated look and reduce your utility bills for a double payoff. With the Department of Energy reporting that a new Energy-Star-certified fridge could save you more than $220 during its 12-year lifetime, this upgrade alone could be worth making. 

3. Invest in wellness 

The COVID-19 pandemic brought a renewed focus on maintaining good health, so incorporating wellness features in your home could be an upgrade worth considering in 2025.

Broker Sean Adu-Gymafi of Coldwell Banker Warburg advises installing upgrades like whole-house water filtration systems and air purification systems throughout the home. 

“Water filtration systems will provide better water quality and are better for the environment as they can reduce the amount of bottled water used,” Adu-Gymafi says. “Similarly, installing air purification systems throughout the home can also add value. As more people prioritize health and their well-being, these features are becoming very desirable.” 

The bottom line

These upgrades could help you to improve your financial situation immediately as you bring in rental income, improve your health and lower your monthly bills. They may also make your property more desirable to future buyers. Tapping into equity to complete them could be a smart financial choice in the new year, especially if you shop around for loans at competitive rates and take advantage of new, more affordable borrowing opportunities.