According to Transunion, origination for home equity loans, home equity credits (HELOCS) and cash out refinance increased 11% in the fourth quarter of 2024. This represents a 3rd quarter increase compared to the previous year. And it doesn’t stop there. HELOC balances are also growing, according to the New York Federal Reserve.
Obviously, there’s a bit of time to lend home equity. One of the main reasons is that HELOC and home equity loan fees have fallen from their peak in 2024, while mortgage fees and other interest rates remain stubbornly high. This phenomenon makes borrowing on shares in homeownership better than alternatives such as mortgage refis, personal loans, and credit cards. This is especially true when cash needs are related to home remodeling, renovations, or repairs (the main reason why people bring out the fairness of their hometown).
And with stock levels at record highs, homeowners are doing more work than ever. Homeowners’ equity reached $17.6 trillion in the second quarter of 2025, according to Ice Mortgage Technology.
Let’s take a closer look at why Home Equity Loans and Helock are on the rise and what you need to know if you want to join the trend.
What is Home Equity?
Important Terminology
Why do homeowners use their fairness?
Why do homeowners take advantage of HELOC and home equity loans? It’s mainly because it can be done. The pandemic-fueled real estate boom has brought high-ranking ownership benefits over the past two years. According to Attom, more than 46% of homeowners who own mortgages are “equity-rich,” meaning they are less than half the value of their home.
Add to mix: Improved borrowing costs. After a surge in 2022-23, interest rates on home equity products began to soften in 2024. This continues this year. According to a survey of Bankrate’s national lenders, Healocs had been rocking recently as of June, but as of June they remained at a full point lower than a year ago. When it comes to home equity loans, they are approaching this year’s lows.
When it comes to homeowners’ motivations, many people use home equity to purse their property and better equip them to meet the needs of their families. In fact, Bankrate’s Home Equity Insights Survey has found that over half (55%) of current homeowners view repairs and improvements as a legitimate reason to utilize the value of their homes.
Lending money to upgrade an old home makes much more sense than trying to buy a new home recently. Nearly 60% of activity mortgages for nearly 51 million people are less than 4%, according to the Consumer Financial Protection Agency. A fifth has a rate of 5% or more. Mortgage fees currently average near 7%, at a record home price, so travel maths simply don’t sum up.
If you want to fund renovations, these high mortgage rates also mean that taking away your home equity loans makes more sense than a recent cash-out refinance. Refi for cash out refi to retrieve a new mortgage that includes a lump sum to play means giving up on new, perhaps higher, and perhaps higher interest rates. In contrast, “A home equity loan allows you to place that first (mortgage),” said Scott Bridges, chief consumer direct lender at Pennymac, a California-based lender.
Of course, there are many other reasons to tap Home Equity. If you have a large credit card balance, a Home Equity Loan or HELOC offers a low-cost way to carry that debt. In addition to saving money, they also offer the convenience of consolidating your debt into one monthly payment. Debt consolidation is the second most common reason homeowners cite to tap home equity in their bank rate surveys, as household debt is more than a record $18 trillion in the first quarter of 2025.
“Combining the rich equity market with the very high debt market, we have the perfect solution for home equity loans,” Bridges says.
What does the home equity loan boom mean for the housing market?
Mark Hamrick, a senior economic analyst at Bankrate, describes today’s housing market as a classic case of “good news, bad news.”
Bad news? Ambitious homeowners face high challenges with affordable prices, supply shortages and mortgages. Good news? Among these same challenges, homeowners enjoy the benefits of rising home prices and stock levels.
“For many current owners, proverb paydays come when it’s time to sell. “But before that, tapping fairness with the tools of Home Equity Loans and HELOCS will bring about previous benefits.”
One of these benefits is that if tapped stock funds are heading towards a home renovation or modernization, they can include more valuable assets. Another bright spot: If a HELOC or home equity loan is used for home-related repairs or modifications, interest is tax deductible. It can reduce the real cost of fundraising.
Homeowners can also reduce these real costs. Home-based stock interest rates have fallen from last year’s high, but they are not as cheap as they used to be. For example, as of June 18, 2020, the average fee for home equity loans over the course of 10 years was 5.66%. As of June 18, 2025, the rate averaged 8.41%. Heloc is also relatively expensive. Currently, the average is 8.27%, and 4.71% five years ago.
The disadvantages of the home equity borrowing boom
One potential concern for the equity borrowing boom is that homeowners are renting a lot without fully aware of the outcome, which could lead to more homes being caught up in foreclosures and financial straits. Bankrate’s chief financial analyst Greg McBride notes that by paying off credit cards and other debts with home equity loans, the roof is placed on his head.
“If you take away your unsecured credit card or personal loan debt and secure it at home, the default outcome is a completely different ball game,” he says. Frankly, you could lose your home – as collateral for a loan, you could seize it to pay off your debts.
The stock value may decrease
Certainly, that’s the worst case scenario. However, please note that if the value of your home is reduced, your home may be less valuable than all unresolved mortgages. In other words, you borrow more than the value of your home – you have “negative fairness” in the language of real estate lending. If the debt is at least 25% more than the actual property value, it is defined as serious underwater.
A recent report from Attom found that the proportion of severe underwater housing increased in 48 states and Washington, DC in the first quarter of 2025, with Kansas, Utah and South Carolina outperforming year-on-year. At 2.8% of all homes, it’s still part of the housing market, but it’s a potential warning sign.
The point is simple. Be aware of the home price trajectory in your area. Also, if you are concerned about the potential loss of property value, don’t undertake more debts. No one is predicting a conflict in the housing market. However, it is dangerous to assume that nothing has risen forever and that it is.
How to get the best home equity loan interest rates
Whether you want to add it to your new kitchen or pay back that extra large credit card balance, a HELOC or HOME equity loan offers potentially less average means for those purposes. Although each product works differently, the process for one shopping remains the same. Here are some tips:
1. Calculate fairness.
You know that your home has increased, but you don’t know exactly where you are standing. Estimate the fairness of your home by taking the difference between the value of your home and what you still owe on your mortgage. The best value decision comes from a licensed appraiser, but for a rough idea, look at the online home price estimator or home equity calculator. Once you have your number, find your mortgage balance with the latest statement and do your math.
2. Get a great credit before applying.
Home equity finance requires a fairly strong financial profile, especially for your credit line. In the third quarter of 2024, the median credit score for HELOC applicants was 763, according to data from the Home Mortgage Disclosure Act. Many home equity lenders approve applicants with low credit scores, but the rules that apply to all loans are still true. Borrowers with a high credit score always have the lowest rate.
If you don’t know the best way to improve your credit score, start by looking at your credit card. Bankrate’s latest credit card debt survey found that half (53%) of credit card debtors have a balance for at least one year. Lenders will consider credit utilization and minimum payment obligations when evaluating the application. The more you get these balances, the better you will be, both in terms of your approval potential and overall financial well-being to lower your interest rate.
3. Start your search at your current bank.
There are several types of home equity lenders, but start with where you already know, your bank or credit union. Many institutions offer interest discounts (savings of 0.25% or 0.5%) to customers who set up automatic payments from checking or savings accounts. However, check out one or two offers from online-only lenders as well. If you are qualified, you may be able to get funds faster or at a lower cost.
4. Compare prices and conditions.
It’s not just a minimum fee. In addition to interest rates, you should consider the total cost of the loan annual rate (APR), alias, the annual rate (APR), which is a factor in all charges related to the loan. While Home Equity Loans and HELOCs tend to have significantly lower closure costs than initial mortgages, McBride recommends paying close attention to comparative shopping and fine printing of loan proposals. For example, some lenders charge large origination fees. Or offer to cover the HELOC closure costs “as long as you maintain a line of credit for three years,” says McBride.
