Locked in with a nice low mortgage rate from 2020/2021? Nice. But now what? You likely won’t want to give up that rate in exchange for cash from your home equity. In this article, we’ll look at housing market trends and how to unlock your home equity without giving up your low mortgage rate.

Record-high home values continue to rise

Home values have been rising dramatically over the past two years. In a recent survey, 71% of respondents agreed that there was never a better time to purchase a home than the last couple of years. (Source) National home values were up 18% year-over-year at the end of 2021. (Source) The average homeowner is sitting on approximately $178,000 in home equity. (Source) According to the Federal Reserve, the nationwide total home equity is estimated at $25.3 trillion as of the fall of 2021.

Interest rates on the rise

Homeowners who purchased or refinanced homes while mortgage rates were at record lows were likely able to both lock in a great rate and ride the wave of home appreciation as the housing market took off in 2021.

Over 14.2 million people refinanced home loans between July 2020 and September 2021 when rates were lowest, with an average interest rate of 2.85% across all mortgages. (Source)

However, taking advantage of one's home equity in the form of cash is becoming more difficult with interest rate hikes coming to combat inflation. (Source)

With the shift to working from home, there has also been a shift in what people are tapping their home equity to finance. For example, before the pandemic, 62% of Figure members used their Home Equity Line of Credit for debt consolidation. However, the number of homeowners who report using their equity for home improvement has increased by 20% between July 2020 and November of 2021.

As mortgage rates rise, consumers may look for new ways to tap their home equity for cash while keeping their low mortgage rates. They can use their equity to pay off debts, complete a home improvement, or get cash they need.

In a survey conducted by OnePoll and Figure, 61% of respondents said they are currently considering a cash-out refinance or home equity line of credit to make home improvements or consolidate debt. (Source)

In conclusion

With home values at an all-time high and rising, there’s never been a better time to consider using your home equity for a home improvement or debt consolidation. While there may be scenarios that a cash-out refinance could benefit you, it’s best to look at the numbers and understand the long-term costs associated with each option.

See how much you could save with a HELOC vs. a Cash-Out Refi.

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