Home values are up: the benefits of taking out a HELOC now
In the United States, the real estate market has pushed home equity up to record highs. However, there’s no guarantee that the housing market will maintain its current strong stride.
If you’re a qualifying homeowner, you should lock in the recent gains in equity for future use. If the real estate market cools down in the near future, we will see more people looking for less expensive financing options.
By taking out a home equity line of credit (HELOC) now when equity is up, you could get ahead of the curve and also benefit from the recent growth in home prices.
Let’s look at the benefits of taking out a HELOC now while the market is hot so you can leverage your booming equity.
Your home prices have probably increased in value recently, meaning that your equity is likely higher than ever — and you may not even realize it. According to Black Knight data, the average U.S. homeowner has $153,000 in “tappable” equity.
This is because when home values increase, equity does, too.
According to the National Association of REALTORS® data, home prices hit an all-time high of $413,800 in June 2022.
Just one month later in July 2022, prices dropped to $403,800. In August 2022, prices dropped again to $389,500. While prices have already begun to dwindle, they are still significantly higher than in previous years.
If the housing market continues to cool off, the increases in equity that homeowners are currently seeing may not last. As a result, there may be immense value in acting now to take advantage of the strong equity.
Homeowners can convert their equity into accessible cash by leveraging a home equity line of credit (HELOC).
A HELOC is a loan that uses your home equity as collateral. To qualify for a HELOC, homeowners generally need to have met a minimum equity threshold and maintain good credit.
HELOCs are known to offer competitively low interest. Since the home equity is backing the loan, lenders can offer borrowing homeowners preferential terms and conditions.
Since a HELOC’s maximum loan amount is the amount of equity built up in the home, you may be able to access higher credit lines by getting a HELOC while the market is still thriving.
If you wait, even if your borrowing qualifications do not change, you could be subject to a reduced loan amount due to real estate value and equity market trends.
Since a HELOC can give you the power to turn your equity into tappable cash, there are many things you can do with your newly-accessed equity.
Just like any source of funds, how you use them is up to you. Generally speaking, homeowners use their HELOCs to cover high-ticket expenses for a variety of reasons.
So what can you really do with a HELOC? Here are a few of the common reasons why homeowners take out HELOCs.
If you’re faced with any of these financial needs, a HELOC can provide you with the money you need by converting your home equity into financial power.
If you act now while the markets are performing positively, you may be able to set yourself up for a better long-term outlook with your HELOC.
Like all loans, a HELOC is technically a debt. The money you pull out and convert into cash is your principal balance. If you are able to secure a higher loan amount, you can help boost your credit with a favorable debt-to-credit ratio.
A higher loan amount will give you greater bandwidth, reducing the debt-to-credit ratio set by your HELOC’s principal balance.
This is one of the ways that you can take advantage of the current real estate market conditions to lock in a great situation that can benefit your financial future for years to come.
Interested in making the most of the current market conditions? Take the first steps with Hitch. When you source your HELOC through Hitch, you can access the following benefits:
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