Home Equity Reaches an Astounding $9.4 Trillion. Here's How to Maximize Yours

Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.

KEY POINTS

  • Home values have soared in the course of the year, leading to higher levels of equity.
  • The average mortgage borrower had $178,000 of home equity as of this year's third quarter.

You can benefit from having a lot of equity in your home.

The past year has been a frustrating one for potential home buyers, to say the least. While mortgage rates have remained low, home values have soared on a national level, making once-affordable properties out of reach.

But while higher home values may be hurting buyers, they're a great thing for existing homeowners. In fact, Black Knight reports that as of 2021's third quarter, home equity among U.S. property owners rose to a record $9.4 trillion. That amounts to an average of $178,000 per borrower. It also marks a 32% increase from the previous year.

If you're sitting on a lot of home equity, there are several ways you can borrow against it. Here are three worth looking into.

1. A home equity loan

With a home equity loan, you borrow a lump sum of money that you pay off in equal installments over time. Home equity loans commonly come with fixed interest rates, making your monthly payments predictable.

You're not restricted to home-related expenses when you take out a home equity loan. While many borrowers use these loans to finance home improvements or repairs, you can use that money for any purpose.

Often, you'll snag a lower interest rate on a home equity loan than you will another type of financing, like a personal loan. But be careful, because falling behind on home equity loan payments could put you at risk of losing your home.

2. A HELOC

A HELOC, or home equity line of credit, gives you access to a sum of money you can draw from within a specific period of time – usually five to 10 years. HELOCs can be more flexible than home equity loans because you can apply for a higher sum and only borrow the amount you actually end up needing. Any part of your HELOC you don't touch is money you won't owe or accrue interest on.

But HELOC interest tends to be variable, so once you do start paying back that HELOC, you may struggle with the fact that the amount you owe each month changes over time. Like home equity loans, HELOCs let you borrow money for any purpose. And it's just as important to keep up with HELOC payments because your home is used as collateral for the money you borrow.

3. A cash-out refinance

With a cash-out refinance, you borrow more than your remaining loan balance and can use the extra cash for any purpose. Then, you simply repay the total amount you borrow like you would with a regular mortgage.

Since refinance rates are so low right now, a cash-out refinance can be a very affordable borrowing option. But the higher a mortgage you take out, the more difficult it may be to keep up with your monthly payments, so proceed with caution when taking cash out of your home.

Higher home equity levels could open the door to more borrowing options for homeowners. Just as importantly, those struggling to keep up with their housing costs may now have the option to more easily sell their properties, walk away mortgage-free, and downsize or relocate. If you're sitting on a lot of equity in your home, it pays to explore the ways doing so could help you meet goals or better your financial picture.

Alert: our top-rated cash back card now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes.

Our Research Expert

Related Articles

View All Articles Learn More Link Arrow