Home Equity Increases to a Record 15-Year High: How Homeowners Can Tap Into It
Homeowners across the United States are experiencing a significant financial boost as home equity has increased to its highest in 15 years.
According to recent reports, homeowners with mortgages saw their home equity increase by an average of $14,000 year over year in the second quarter of 2024.
While this increase is largely due to rising home values, which have outpaced inflation and other economic factors, it has also boosted the number of home equity loan applications.
If you’re a homeowner, this surge in equity presents a unique opportunity to leverage your home’s value for financial goals.
At MIDFLORIDA Credit Union, we’re here to help you understand how this increase in home equity benefits you and how you can tap into it to meet your needs.
Access your home equity with the help of MIDFLORIDA.
What is home equity, and why is it increasing?
Home equity refers to the portion of your home’s value that you own exceeds the debt, calculated as the difference between your home’s current market value and the balance of your mortgage.
- Example: A home worth $400,000, but the owner has $250,000 left to pay on their mortgage, meaning their equity is $150,000.
Why is home equity increasing?
Several factors drive the recent rise in home equity:
- Rising home prices: Increased demand for housing, coupled with limited inventory, has caused home values to climb steadily over the past several years.
- Stable mortgage rates: Many homeowners locked in low mortgage rates, keeping their monthly payments affordable and allowing their equity to grow as home values rise.
- Paying down mortgages: As homeowners make mortgage payments, their loan balances decrease, increasing their overall equity.
This combination of market forces has contributed to a historic surge in home equity, creating opportunities for homeowners to access these funds.
Benefits of tapping into your home equity
Home equity is frequently your most valuable financial asset. By accessing it strategically, you can achieve various goals, from improving your home to consolidating debt.
Affordable financing
Home equity loans generally feature lower interest rates than credit cards or personal loans because your property secures them. This makes them an affordable option for financing major expenses.
Flexible uses
Funds from most home equity loans or lines of credit (HELOC) can be put toward a wide range of purposes, including:
- Home renovations or repairs
- Paying off high-interest debt
- Funding education
- Investing in a second property
- Covering medical expenses or unexpected costs
Fixed or variable rates
Home equity loans provide predictable fixed-rate payments, while HELOCs offer variable rates for flexible borrowing as needed.
Both options have features that could benefit your particular financial situation.
Tax advantages
In certain cases, interest paid on a home equity loan may be tax-deductible if used for home improvements. Check with a tax advisor to determine if this applies to your situation.
How to tap into your home equity
If you’re ready to take advantage of the record increase in home equity, here’s how to get started:
Determine your home’s current value
To calculate your available equity, estimate your home’s current market value.
This can be done through:
- Online tools: Use real estate websites to view comparable property values in your area.
- Professional appraisals: A professional appraisal provides the most accurate estimate of your home’s worth.
Calculate your equity
Subtract your remaining mortgage balance from your home’s value to determine your equity.
Most lenders consider up to 80% to 90% of your home’s equity for lending, depending on your creditworthiness and financial profile.
Example calculation:
- Home value: $450,000
- Mortgage balance: $250,000
- Total equity: $200,000
- Maximum loan amount (80% of equity): $160,000
Review your credit and finances
Lenders will assess your credit score, debt-to-income (DTI) ratio, and financial stability to determine your eligibility for a home equity loan.
To improve your chances of approval, you might take steps to:
- Check out your credit report—address any inaccuracies.
- Pay down existing debts to lower your DTI ratio.
- Gather documents ahead of time, such as proof of income and tax returns.
Choose the right loan option
Does a home equity loan or a HELOC best suit your needs?
- Home equity loan: Ideal for large, one-time expenses—a home equity loan results in you receiving a lump sum with fixed payments.
- HELOC: Perfect for ongoing or unpredictable costs—most treat it as a revolving line of credit with variable interest rates.
Apply for a loan
Start your application with a trusted lender like MIDFLORIDA. We offer a seamless application process with personalized service to ensure you get the right loan for your needs.
Use your funds wisely
Once approved, you’ll receive the funds from your home equity loan or access to your new HELOC. Use these funds strategically to achieve your financial goals while maintaining a manageable repayment plan.
Considerations when tapping into your home equity
While accessing your home equity can be a smart financial move, it’s important to weigh the potential risks and benefits.
Risk of foreclosure
Because your home serves as collateral for a home equity loan or HELOC, failing to make payments could put your property at risk. Borrow responsibly. Ensure you can comfortably afford the payments.
Additional debt
Accessing your home equity increases your overall debt, which could impact your financial flexibility. Be sure to borrow only what you need and maintain a solid repayment plan.
Market fluctuations
While home values have risen significantly, real estate markets can be unpredictable. If home prices decline, your equity could decrease, potentially impacting your financial plans.
Now is the time to take advantage of home equity increases
With home equity at a record 15-year high, there’s never been a better time to leverage your home’s value for your financial goals.
Whether planning a renovation, consolidating debt, or investing in your future, MIDFLORIDA is here to help.
Ready to take the next step? Start your home equity application today to fully take advantage of our financial flexibility and competitive rates.
The following web blog is intended for educational purposes only, is not an offer of credit or advertisement of currently available loan terms or products, and is not legal advice. Please consult our loan web pages or your professional advisors for more specific information.
