Thanks for running house priceAccording to statistics, as of the first quarter of 2024, homeowners will have more than $32 trillion in home equity Federal Reserve Bank of St. Louis ——A record high.
“This is one of the very few things we can say that is more or less positive about today’s housing market,” said Jacob Channel, senior economic analyst at LendingTree.
While the average borrower has approximately $214,000 in accessible equity, 60% of homeowners have at least $100,000Intercontinental Exchange’s Mortgage Monitor also found. Available equity is the amount of money most lenders will allow you to withdraw while still keeping a 20% cushion in your home.
Andy Walden, vice president of research and analysis at Intercontinental Exchange, said rising home prices “continue to increase the wealth of existing homeowners, pushing available equity to historically high levels.”
How to get cash from your home
Although homeowners have record housing wealth, the cost of borrowing against their homes is also near its highest level in recent years, largely due to a series of rate hikes by the Federal Reserve, said financial analyst Greg McBride. . at Bankrate.com.
high interest rate Making obtaining home equity more challenging.
“For a long time, people have thought this was a cheap source of funding, but that perception has changed,” McBride said.
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After the pandemic hit, many existing homeowners refinanced their mortgages when interest rates hit rock bottom and pocketed the difference in a lump sum.
Currently, with mortgage rates About 6.3% of homeowners are willing to seize this opportunity cash out refinance.
“As interest rates come down, you may see more cash-out refinancing opportunities, but no one will confuse that with 2021,” McBride said, referring to the “ultra-low” period Rate The Fed lowered its benchmark to close to zero.
However, as mortgage rates fall, some homeowners have become more willing to refinance Down from recent highs – As of the latest data, mortgage refinancing demand exceeds Improve 100% than a year ago.
Alternatively, a home equity loan is a type of second mortgage that allows the borrower to withdraw cash while using their home as collateral. In this case, the loan is a one-time loan with a fixed interest rate.
“For homeowners who want to raise funds to pay for improvements, a home equity loan may be a good option, either to make the home more to their liking or to make improvements before selling the home next year,” Home Equity Loan Co. said Holden Lewis of.
However, the average home equity loan interest rate is currently 8.52%. according to Bank interest rates are significantly higher than 30-year fixed-rate mortgages.
In this case, Lewis said, “higher interest rates are also causing homeowners to be reluctant to take out fixed-rate home equity loans, but that concern will be alleviated as rates fall.”
Otherwise, a Home Equity Line of Creditalso called a HELOC, allows you to borrow money part of your home equity. Instead of taking out a home loan for a fixed amount, a HELOC is a revolving line of credit, but the interest rate is lower than credit card — You can use it when you need it or when you have it handy.
According to Bankrate, the average interest rate on a HELOC is just under 10%. While these rates are high compared to a typical mortgage or home loan, they are significant reduce Higher than the cost of credit card borrowing, the average credit card charge exceeds 20%.
Consider terms, rates and risks
Of course, depending on the LendingTree channel, different lenders will also offer different terms and interest rates.
Channel recommends talking to several mortgage companies or loan officers and weighing all the costs before deciding which course of action makes the most sense.
He added that loan rates and terms are not the only considerations when it comes to borrowing against a home. There are also risks associated with getting cash from your home.
“Defaulting on a home equity loan can have serious negative consequences,” Channel said.
Chief among them, he said, is that failure to repay a home equity loan can lead to foreclosure. Even if it doesn’t, it can still damage your credit and otherwise make it harder for you to get approved for another loan – no matter what type.
“The best advice is to be thorough and plan ahead,” Channel said. “Make sure you’re in a good position that whatever you borrow, you’ll be able to pay it back. That’s not one of the things you should try.”
