Homeowners have an estimated $25 trillion in home equity built up, and more are tapping that equity. But the reasons for taking on those equity loans are shifting.
The D.C.-based Mortgage Bankers Association reports applications for home equity loans and open-ended home equity lines of credit — or HECLOs — rose 7.2% in 2024. Total outstanding home equity debt rose by 10.3%.
Home equity borrowing is attractive to mortgaged homeowners who have low rates locked in from several years ago, and borrowing a portion of equity, even at a higher rate, is less of a burden.
Among those loans last year, 39% were taken out for debt consolidation, or paying off high interest loans like credit card balances and student loans, up from 25% two years earlier. The share of equity loans taken out for home improvement projects fell to 46%, from 65% of loans in 2022.
“With close to $35 trillion of homeowner equity in residential real estate and many homeowners locked into low-rate first mortgages, HELOCs and home equity loans have become the product of choice for many homeowners,” said Marina Walsh, the Mortgage Bankers Association’s vice president of industry analysis.
“Lenders in our study expect year-over-year growth of almost 10% for HELOC debt and 7% for home equity loan debt in 2025.”
Not all applications for equity loans are approved.
The Mortgage Bankers Association said around 50% of applications are closing, and the average time to close on an equity loan is currently 39 days.
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