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An Increasing Number of Homeowners Tapping Into Home Equity

As the housing market finally displays signs of continued cooling, home prices across the nation remain at inflated highs, with Americans sitting on a record $27.8 trillion in home equity, according to a new study from LendingTree —an estimated $333,000 worth of equity for each owner-occupied housing unit in the nation.

While most homeowners likely don’t have that much value built into their properties, many are nonetheless tapping into the equity they’ve generated through home equity loans. To better understand how much money homeowners are looking to borrow against their equity, LendingTree analyzed more than 350,000 home equity loan offers to users of their online loan shopping platform from Jan. 1 through July 20, 2022.

LendingTree found that the average size of a home equity loan offer is approximately $50,000 or higher in all but one of the nation’s 50 states.

Key findings:

  • The average home equity loan offer across the nation’s 50 states is $83,872. Average loan offers vary from nearly $130,000 in Colorado to less than $31,000 in Iowa.
  • Colorado, Hawaii and Connecticut homeowners are being offered the largest average home equity loans. In Colorado, home equity loan borrowers are approved for an average of $128,482. That’s followed by $119,172 in Hawaii and $112,721 in Connecticut.
  • On average, borrowers in Iowa, Alabama and Nebraska receive the smallest home equity loan offers. In Iowa, the average home equity loan amount offered is $30,904, making the Hawkeye State the only state where the average offered loan is worth less than $50,000. In Alabama and Nebraska, borrowers received average loan offers of $55,098 and $56,509, respectively.
  • Offered interest rates on home equity loans can vary notably by state. For example, the average rate of 8.47% offered to borrowers in Alaska —the highest in the nation— is nearly 4 percentage points higher than the average rate of 4.55% offered in Maryland —the lowest in the nation.
  • Like rates and loan amounts, monthly home equity loan payments can vary by state. The highest average payment in the nation is in Hawaii, where home equity loan offers would cost borrowers an average of $1,102 a month. On the other hand, the average home equity loan payment for Iowans would be only $284 a month —the lowest in the nation.

States where homeowners are offered the largest home equity loans:

1. Colorado

  • Average offered home equity loan amount: $128,482 
  • Average offered home equity loan interest rate: 5.22% 
  • Average offered home equity loan monthly payment: $552 

2. Hawaii

  • Average offered home equity loan amount: $119,172
  • Average offered home equity loan interest rate: 7.40% 
  • Average offered home equity loan monthly payment: $1,102

3. Connecticut

  • Average offered home equity loan amount: $112,721
  • Average offered home equity loan interest rate: 5.08% 
  • Average offered home equity loan monthly payment: $460 

 

States where homeowners are offered the smallest home equity loans:

1. Iowa

  • Average offered home equity loan amount: $30,904
  • Average offered home equity loan interest rate: 7.23% 
  • Average offered home equity loan monthly payment: $284 

2. Alabama

  • Average offered home equity loan amount: $55,098
  • Average offered home equity loan interest rate: 8.44% 
  • Average offered home equity loan monthly payment: $564 

3. Nebraska

  • Average offered home equity loan amount: $56,509
  • Average offered home equity loan interest rate: 8.05% 
  • Average offered home equity loan monthly payment: $556

 

Increased home equity is a tangible benefit of rising home pricesWhile getting into the real estate market can be challenging when home prices are steep, that doesn’t mean rising prices are all bad news. In fact, rising prices can be a good thing for current homeowners.

For example, the record amount of home equity that homeowners are sitting on is likely the result of how high home prices have climbed since the start of the pandemic. This is because homeowners generate home equity when the value of their property increases above the value of their mortgage. In other words, if property values rise dramatically —as they have since the start of the pandemic— homeowners can generate a significant amount of home equity, even if they haven’t paid off much of their mortgage.

Building equity can yield numerous benefits for homeowners. For example, tapping into equity through a home equity loan or a home equity line of credit can allow homeowners access to cash that they can use for various purposes, from home renovations to paying off higher-cost debts. Having equity can also be beneficial when it’s time to sell your home, as the more valuable a home is relative to what was paid for it, the more money a seller will end up making in profit.

Though the prolonged rapid growth of home prices since the start of the pandemic is a cause for concern that should be addressed, the high amounts of home equity that many Americans are sitting on as a result of recent price growth is nonetheless a positive worth recognizing.
To read the full report, including tips to tapping into home equity, more charts and methodology, click here.

About Author: Demetria Lester

Demetria C. Lester is a reporter for DS News and MReport, with more than six years of writing experience. She has served as Editor-in-Chief at Northlake College and staff writer at her alma mater, the University of Texas at Arlington. She has covered events such as the Byron Nelson, Pac-12 Conferences, the Women in Dallas Film Festival, to freelance work with the Dallas Wings and D Magazine. Currently located in Dallas, Texas, she is an avid jazz lover and reader. She can be reached at [email protected]
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