Home equity is up $1.3 trillion year-over-year: 5 reasons to tap into yours now
Home prices have grown in recent years — which is challenging for homebuyers but great for homeowners. That's because higher home prices typically mean that homeowners have lots of home equity to tap into when they need to borrow money.
And, not only did the average homeowner have about $200,000 in tappable home equity in August 2023, but home equity increased by a combined $1.3 trillion from the fourth quarter of 2022 to the fourth quarter of 2023, according to a recent CoreLogic report. So, the average homeowner has a significant amount of equity to tap into if they need it.
There are some benefits to borrowing against your home equity. For example, home equity loans and home equity lines of credit (HELOCs) typically come with competitive interest rates since they're secured by your home. So, they may be a compelling borrowing option in a wide range of potential situations.
Find out the home equity loan rates you could qualify for now.
Home equity is up $1.3 trillion year-over-year: 5 reasons to tap into yours now
There are several reasons it may be wise to take advantage of your home equity now, including:
To repair your home before the seasons change
Spring is around the corner, and so are warmer temperatures and wetter weather in many markets. So, if you have a home that needs repairs to its roof or HVAC system, you may want to make those repairs as soon as possible.
And, your home equity may be an efficient way to cover those costs, as the rates on these loans are typically lower than what you can get with a credit card or personal loan. Plus, if you use the proceeds from a home equity loan to repair your home, your home equity loan interest may be tax deductible.
Use your home equity to cover the cost of home repairs today.
To pay off high-interest debt
Right now, interest rates are high across the board — which means that variable-rate debts, like credit card debts, cost a lot more than they did in terms of interest. So, if you're carrying a balance on your credit cards, it could make sense to use your home equity to pay off what you owe and lower your interest rate while doing so.
"Leveraging a home equity loan is a good option for debt consolidation," says Eileen Tu, vice president of product development for Rocket Mortgage. "Often times, home equity loans have a lower interest rate than unsecured lines of credit like credit cards."
But interest isn't the only reason to consider paying off your high-rate debt with a home equity loan. "Home equity loans also provide predictable and streamlined payments by combining multiple payments into one," says Tu.
To start a business or side gig
You could also use your home equity to expand your earning potential by investing in a small business or side gig. For example, as spring rolls in, you could use your home equity loan to purchase a lawn mower and other equipment to start a landscaping business.
To buy a second home
As seasons change, your desire for a second home may grow. The good news is that your home equity could be a source of financing to help purchase a second home — especially if you need the money for a down payment.
To pay for other expensive repairs or purchases
There are lots of other reasons why you may need to borrow money. For example, you may need to purchase a new car or make repairs to another property. And, borrowing against your home equity could be a low-cost way to fund these types of expensive repairs and purchases.
Find out how much equity you have access to now.
The bottom line
If you own a home, you may have home equity available to you. Given the competitive interest rates and terms they come with, a home equity loan could be a smart option for covering a wide range of expenses, from repairing your home to paying off high-rate debt, starting a business or even buying a second home this March.
