Even with slowing home price growth, many homeowners are finding value in their properties. They are willing to tap into their home equity for various needs, which could affect your financial choices.

Homeowners Are Borrowing Against Their Equity

Recent reports indicate that homeowners accessed around $47 billion in home equity in the first quarter of 2026. This money represents the difference between what they owe on their mortgages and the current market value of their homes. The volume is high compared to recent years, although slightly down from $49 billion at the end of 2025. The most common ways homeowners withdraw equity are through home equity lines of credit (HELOCs) and home equity loans, which accounted for over half of the total equity tapped.

This trend is notable because it reflects the current state of the housing market. With significant equity available for many homeowners—estimated at around $11 trillion—borrowing against it may seem tempting. However, homeowners must carefully consider their financial circumstances before making such a decision.

Understanding Your Home’s Equity

The interest rates for a typical 30-year fixed mortgage have recently risen above 6.5%. This increase comes after a period when rates were dipping in the low 3% to 4% range. The median price of an existing home has also surged, increasing by 1.3% from the previous year. This surge after the pandemic means that many homeowners have built considerable equity and may find it appealing to cash out.

However, tapping into home equity isn’t just about having access to cash. It’s essential to understand that this money isn’t free; it comes with its own set of costs. Certified financial planners caution homeowners to weigh the reasons for borrowing carefully. It’s crucial to ensure that the purpose of the loan justifies the potential long-term costs.

Options for Tapping Into Home Equity

If you decide to tap into your home equity, you have a few options. A cash-out refinance allows you to refinance your mortgage and take out part of your equity in cash. This process requires going through the entire mortgage approval process and pays closing costs that range from 2% to 5% of the new loan.

Alternatively, some homeowners opt for a second loan instead of refinancing their existing, lower-rate mortgage. Home equity loans typically come with fixed rates and fixed payments. As of mid-2023, the average rate for a five-year home equity loan was around 8.12%, while a 15-year loan had an average rate of 8.2%.

Another option is a HELOC, which provides a line of credit over time. Although HELOCs may have fewer upfront costs, they usually come with variable interest rates, meaning your payments can increase over time based on market conditions.

Consider Your Financial Goals

Given the complexity of these options, it’s crucial to reflect on why you might want to tap your equity. Financial advisors recommend using the funds for purposes that improve your home or help with essential expenses. For example, investing in home repairs might lead to increased value, making that a worthwhile use. However, if you plan to use the funds for vacations or other luxury items, you might want to rethink.

Additionally, both HELOCs and home equity loans use your home as collateral. This means that if you fail to make payments, you risk losing your property. Therefore, ensure that any cash borrowed fits comfortably within your budget.

What this means for you

If you’re tempted to tap into your home equity, think carefully about your financial goals and the long-term implications of borrowing. Be clear on why you’re borrowing and ensure it aligns with your financial situation. If you ever need to review a home equity loan agreement or a HELOC, legal-document-to-plain-english-translator/”>AI legalese decoder can translate it into plain English in seconds.

Source: https://www.cnbc.com/2026/06/19/home-equity-borrow.html