Homeowner Equity Hits Record High
This month, tappable homeowner equity, reached the highest level ever recorded. Tappable equity refers to the value of the home minus the standard 20% lenders recommend homeowners keep as a security cushion. As of July 2018, US homeowners have a total of $5.8 trillion in tappable equity. In the past year, the average homeowner gained $14,700 and currently has an average of $113,900 available to withdraw.
Despite the increase in tappable equity, just 1.17% of available equity was tapped in the first quarter of 2018. Executive vice president of Black Knight’s Data & Analytics division, Ben Graboske explained the lack of action, “I think the typical American doesn’t have that level of awareness, they’re not probably studying the numbers.” As home values continue to rise, the amount of accessible equity will increase proportionately.
Making Your Equity Work for You
Homeowners can use their home’s equity to pay down debt, save for retirement, afford healthcare costs, or reinvest in their home. Homeowners looking to withdraw home equity can do so through a cash-out refinance or a home equity line of credit (HELOC). The best way to access your home’s equity depends on how you plan to use it. A cash-out refinance is a better option to achieve long-term goals and a HELOC may be better suited for ongoing needs. Before deciding how to access the equity, its best to consult a mortgage professional or financial advisor to review your options.
With a cash-out refinance, the homeowner originates a new mortgage at a greater value than the original loan. A cash-out refinance is a good option when you have a chance to get a lower interest rate than your current mortgage. A better credit score, lower debt to income ratio, or outside economic factors could help the borrower secure a lower interest rate. Most financial advisors recommend reserving a cash-out refinance for a long-term purpose, like renovations on the current home or the down payment on a second home.
The All In One Loan
If you’d like to use your home’s equity more immediately, rather than a cash-out refinance, some financial advisors would suggest a home equity line of credit, like the All In One Loan by CMG Financial. The All In One Loan combines banking and mortgage financing into one account. All In One Loan borrowers are able to access their home’s equity 24/7, just like a checking account. All deposits into the account are applied toward the mortgage principal first, reducing the lifetime cost of mortgage insurance by consistently lowering the balance. When the borrower needs to access equity, they withdraw from their All In One Loan account. In addition to equity access, many All In One Loan borrowers are able to pay off their mortgage faster and save for other expenses like retirement, college tuition, healthcare, and any unexpected expenses.
Tappable home equity nationwide has reached an all-time high, but very few borrowers are taking advantage of this valuable equity. If you’re considering a cash-out refinance, All In One Loan, or other home equity line of credit it’s best to consult a trusted mortgage professional to determine what option will best serve your immediate and long-term financial goals.