Saving Homeowners Billions in Interest
Recently, we explored how homeowners can unlock their equity without giving up a record-low mortgage rate they may have secured over the past couple of years. And what that decision of keeping a nice low mortgage rate could yield in terms of savings over the life of the loan.
Our first article “How to Unlock Home Equity Without Sacrificing Your Low Mortgage Rate” examines trends in record high-home values and rising interest rates. As mortgage rates rise, more consumers are looking for ways to tap their home equity for cash while keeping their low mortgage rate.
The second article of this series dives into the individual amount the average US homeowner could be saving on interest payments with a HELOC vs a Cash-Out Refinance, totaling in at around $89k.
In this article, we explore what this means in aggregate for homeowners.
To assess the potential total savings for average US homeowners, we’ve collected data and made the following assumptions.
The average mortgage debt in the US is $229,242. (Source) And approximately 1.2M homeowners have a mortgage interest rate of 3.0% or lower. (CoreLogic)
Since home improvement is one of the most common use cases for tapping home equity, we’ll look specifically at aggregate savings for this use case. In a survey conducted by OnePoll, approximately 60% of homeowners were considering tapping their equity for cash. (Source)
Let’s assume that 720k homeowners are currently considering a cash-out refi or heloc for tapping equity for a home improvement. (Source)
According to WalletHub, 38% of Americans have an excellent credit score of 720+ and could qualify for rates used in the comparison. We can assume that 273,600 homeowners with excellent credit are considering tapping their equity.
To be realistic, not all of these homeowners who are considering tapping their equity will actually do so. And some of them won’t qualify for other reasons. Let's assume that only half actually decide to tap their equity, how much would they save in aggregate?
Approximately 137k homeowners meet our sample criteria and decide to take out on average $62,000 with a Figure Home Equity Line. On average, according to research from our last article, we assume that the average homeowner could save on about $89k.
This means, there could be over $12B in potential savings available to US homeowners!
In conclusion
$12B in savings is pretty staggering! Of course, this calculation is meant to be for illustrative purposes only, so be sure to check your rate and do the calculations yourself when considering a HELOC versus a cash-out refinance.
With home values at an all-time high, you can tap your home equity using a HELOC, and protect your low mortgage interest rate by keeping it just as it is. No need for a cash-out refinance. Figure has you covered.
See how much you could save with a HELOC vs. a Cash-Out Refi.
