According to recent statistics from CoreLogic, total home equity for U.S. mortgage holders increased to more than $17 trillion in the first quarter of 2024, just missing the record established in the third quarter of 2023.
According to CoreLogic, the average equity per borrower rose by $28,000 from a year ago to roughly $305,000 in total. Selma Hepp, chief economist, stated that’s an increase of nearly 70% from $182,000 prior to the Covid-19 outbreak.
A mortgage is held by roughly 60% of homeowners. Their equity is the amount of the house less any outstanding debt. $34 trillion is the total amount of equity in American homes, both with and without a mortgage.
Line of Credit for Home Equity
The most popular method of accessing housing wealth is usually through a home equity line of credit, or HELOC.
With a HELOC, homeowners can take out a fixed-term loan against the equity in their house. Interest is paid by borrowers on the outstanding amount.
As of June 6, Bankrate data shows that the average interest rate on a home equity loan is 9.2%. In contrast to fixed-rate debt, rates are variable, meaning they are subject to vary. (Homeowners may also want to think about a home equity loan; these loans typically have fixed rates.)
In contrast, Freddie Mac reports that rates on a 30-year fixed-rate mortgage are approximately 7%.
Although HELOC rates are higher than those of a standard mortgage, they are still significantly lower than credit card rates. According to Federal Reserve data, credit card holders with an account balance typically pay an interest rate of almost 23%.
According to Bank of America, borrowers can typically access up to 85% of their home’s value less any outstanding debt.
Homeowners can use a HELOC to settle any remaining high-interest credit card debt. But in order to pay off the HELOC as quickly as possible—ideally in a year or two—they need to have a “very targeted plan”.
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Reverse Mortgage
An option for senior citizens to access their home equity is through a reverse mortgage. Reverse mortgages are also loans against the equity in your home, similar to HELOCs. But instead of paying off the loan every month, borrowers choose to accumulate interest and fees over time, which causes the total to rise.
Reverse mortgages are probably appropriate for folks whose home holds a large portion of their wealth, according to advisers.
The Consumer Financial Protection Bureau states that the most typical kind of reverse mortgage is a home equity conversion mortgage (HECM). Homeowners 62 years of age and above can apply for it.
The Consumer Financial Protection Bureau states that the most typical kind of reverse mortgage is a home equity conversion mortgage (HECM). Homeowners 62 years of age and above can apply for it.
Generally speaking, borrowers can access up to 60% of their home equity.
According to the CFPB, the homeowners or their heirs will eventually have to repay the debt, typically by selling the house.
