Here's how much equity the average homeowner has now
If you're a homeowner, chances are you have at least some home equity to work with right now. Your home equity is the percentage of your home's value that you own free and clear. And, if you tap into this equity, you may be able to borrow money at a competitive interest rate compared to other financing options.
And, with home values as high as they are, you may have more equity than you think. But how much equity does the average homeowner have right now?
Find out your top home equity borrowing options now.
Here's how much equity the average homeowner has now
According to the February 2024 ICE Mortgage Monitor report, the average homeowner currently has about $299,000 in home equity, about $193,000 of which is tappable home equity. Keep in mind that the above is the average equity American homeowners have, so yours may be higher or lower depending on a range of factors.
"Mortgage holders gained $1.6T in equity in 2023 to reach an aggregate of $16T, the highest year-end total on record," the ICE Mortgage Monitor report states.
It's also worth noting that if you borrow against your home's equity, you typically can't tap into 100% of it. Lenders generally limit the amount you can borrow to between 80% and 90% of your home equity. So, right now, the average homeowner can safely tap into $193,000 of their equity "while still maintaining a healthy 20% equity stake," according to the ICE Mortgage Monitor report.
Learn more about your home equity borrowing options today.
3 ways to tap into your home equity
There are multiple ways to tap into your home equity. Some of the more common ways to tap into your home's equity include:
A home equity loan
A home equity loan, also known as a second mortgage, lets you tap into your home's equity with a lump-sum loan. These loans are secured by your home as collateral and typically come with fixed interest rates and minimum payments that you'll make over several years.
Thanks to the fixed-rate nature of home equity loans, they can be a smart choice if you know how much money you need and want consistent monthly payments. But, they may not be the best option if you're unsure of how much money you need in total or if you want a chance to get a lower rate if interest rates drop in the future.
A HELOC
A home equity line of credit (HELOC) allows you to borrow from your home's equity with a line of credit. This starts with a draw period in which you can borrow against your home equity as needed (up to your credit limit). In most cases, you're only required to make interest payments during that draw period, which typically lasts several years. Following the draw period, the repayment period begins, which is when you make payments toward interest and the principal.
HELOCs typically come with variable interest rates, which could be beneficial right now, as experts expect interest rates to start falling later this year. If rates decline over time, the rate on your HELOC would likely follow suit, meaning you'd pay less in interest on the money you borrow.
And, HELOCs also give you flexibility in terms of borrowing, which could come in handy if you don't know how much money you need. On the other hand, if interest rates go up in the long run, your HELOC rate will likely follow, so you could end up paying more in interest than you would with a fixed-rate home equity loan.
A cash-out refinance
You also have the option to take advantage of a cash-out refinance. With this type of loan, you refinance the mortgage on your home and borrow money from your equity in the process. Unlike a home equity loan or HELOC, a cash-out refinance replaces your current mortgage with a new mortgage loan with a new rate and new terms. So, this may be a good fit if mortgage rates are lower than what you currently have on your home.
Compare your home equity borrowing options now.
The bottom line
The average homeowner currently has a sizable amount of home equity to borrow from when they need to pay off high-interest debt, fund a small business or cover other expenses. And, in many cases, you can tap into your home's equity with a much better rate than you'd get with another type of loan. So, if you need to borrow money and have equity in your home, consider taking advantage of a home equity loan, HELOC or cash-out refinance today.
