Do rising home values boost HELOC demand?
Yes, as home values rise, the demand for home equity lines of credit, or HELOCs, typically sees a boost as well.
Home equity is directly tied to your home’s value. So, if your home rises in value, your equity does as well.
Conversely, if your home drops in value, so will your equity.
As home values rise, owners could get access to more money through a home equity line of credit or other loan to access their home equity. During this time, homeowners tend to seek out equity-accessing home loans in case values fall and the amount they can borrow drops as well.
To begin tapping into your home equity and taking advantage of rising home values through a HELOC, start your application today!
Determining home equity
With all the mention of home equity, you may be wondering what is equity in real estate and how to find out the amount of equity you own in your home.
In short, equity in real estate refers to the amount of home you own compared to the amount left on your loan. To determine your home equity, you will need to know your home’s current value and the remaining balance on your mortgage.
To determine the equity you have in your home, subtract your remaining mortgage balance from your home’s current market value. That number will be the value you own in your home. For the percentage, take the number you just got and divide it by the current market value. Then, move the decimal over two places, and you will know the percentage of equity you have in your home.
More equity means more borrowing power
With more home equity, you will have a larger amount to borrow against through a HELOC.
With a typical HELOC, you will get a line of credit based on the amount of equity you have in your home. You will have a period where you can make draws on your line of credit as needed, while only needing to pay interest. After that, you will have to pay back the amount borrowed and interest. Getting a HELOC with Rate will provide you an upfront amount of cash based on your equity, and as you pay that back, you will be given the option to make additional draws.
Other options to access home equity
Besides a HELOC, other loan options that allow you to borrow against the amount of equity you have in your home are a home equity loan and a cash-out refinance.
For a lump-sum amount based on your home’s equity or loan terms and payments similar to your primary mortgage, you can consider a home equity loan. This loan will work as a second mortgage.
A cash-out refinance will replace your current mortgage with one of a higher value giving you a cash sum based on the amount of equity you have in your home.
Similar to a HELOC, more home equity means a larger amount you could borrow through a home equity loan or cash-out refinance.
Why would homeowners take advantage of a HELOC?
Homeowners choose to take advantage of a HELOC for a number of reasons, most commonly to pay for any expenses they have.
Whether you are looking to consolidate debt, pay for any unexpected bills, make home improvements or invest in a business or second home, a HELOC could help you.
The interest rates for a HELOC could be lower than rates on other debts you may have. Consolidating any of those debts under a HELOC could result in lower interest payments.
Some expenses are unexpected and hard to plan for. If your car breaks down and needs extensive repairs, you have any unforeseen medical expenses or there is a home emergency that needs fixing, a HELOC could help you cover the costs.
Home improvements are one of the best uses for a HELOC. Depending on the improvement, you are increasing the value of your home and building back your home equity.
Investing in a business or secondary home can come with rolling costs that you could fund with additional draws from your HELOC.
Does market momentum affect HELOC demand?
Market momentum can significantly affect the demand of HELOCs from homeowners.
If home values are on the rise, you will see more homeowners looking to borrow against their increased equity. If the market slows or enters periods of uncertainty, lenders tend to perceive loans as higher risks and could adjust the rates they offer, which may deter some homeowners from applying for HELOCs.
How can I start the HELOC process?
You can start the process of applying for a HELOC online today!
A HELOC application with Rate can take as little as five minutes, and you could get your funds in as fast as five days*. And our HELOC come with fixed rates, so you don’t have to worry about how the market will affect your payments like you might with a variable rate.**
Start your HELOC application today and get access to your money in as little as five days!
Applicant subject to credit and underwriting approval. Restrictions apply.
Information provided is for educational purposes only. It should not be construed as financial or legal advice or instruction. Rate does not guarantee or assume liability for the accuracy, completeness or timelines of the information. You should conduct additional research before making any mortgage related decisions.
*Subject to verification of income and employment. Assumes closing the loan with remote online notary. Several factors including county restrictions and requirements regarding online closings or ability to determine condition of property may increase funding timeline.
**Our loan amounts range from a minimum of $20,000 to a maximum of $350,000. Your maximum loan amount may be lower than $350,000 and will ultimately depend on your home value and equity at the time of application. We determine home value and resulting equity through independent data sources and automated valuation models.
