According to a September report by CoreLogic, home owners have $315,000 in home equity on average. This is almost $129,000 more that they did at the beginning of the COVID pandemic. The Northeast and California lead the way according to that report. If you are a data geek you can read the entire report here.
Some are tapping into their equity. There are two ways to do that, with a Home Equity Line of Credit (HELOC) or through a home equity loan.
Per CBS News, "The following rates are current as of November 4, 2024, according to Bankrate's home equity loan and HELOC averages. Note that these are nationwide rates. Average rates vary state by state, typically by one to two percentage points.
As of November 4, 2024, average national home equity loan rates are:
- Average overall rate: 8.35%
- 10-year fixed home equity loan: 8.46%
- 15-year fixed home equity loan: 8.38%
The average HELOC rate nationwide is 8.68% as of November 4, 2024."
With the majority of home owners sitting on mortgages averaging 4% they are aren't anxious to do a cash-out refinance so one of these choices is a better way to finance a project like a kitchen remodel.
What is the difference between the two? A HELOC is like a credit card. You can draw money against it as needed, repay the debt and borrow again. Your lender will set the maximum amount you can access which is usually 80% of your home's value. This 80% takes into account the first mortgage on your property as well as the HELOC. The interest rate on the HELOC is variable so it will change as interest rates change.
The other option, a home equity loan, also borrows against your equity but it is done by taking out a lump sum and repaying it in monthly installments.
Talk to your lender if you are considering taking advantage of your equity. Another way, which truly captures your gain, is by selling your house. If you have a plan on where to go this is worth considering. Call me if you want to discuss it.
