Home Improvements Top Reason to Tap Home Equity, Bankrate Reports

(Illustration courtesy of Bankrate)

More than half of current homeowners (55%) see home improvements or repairs as a good reason to access built-up home equity, according to Bankrate, New York.

The Federal Reserve calculates that Americans held a record of nearly $33 trillion in housing equity as of the first quarter of 2024.

After home improvements or repairs, current homeowners also say they consider the following good reasons to tap home equity: debt consolidation (30%), paying tuition or other education expenses (16%), keeping up with household bills (16%), making other investments (16%) and taking a vacation (7%).

Notably, nearly one in 5 of homeowners said there is no good reason to tap home equity, the Bankrate report added.

Overall, older homeowners are less likely to see any good reason to tap home equity than younger homeowners, and older homeowners are also less likely to see merit in tapping home equity for “non-essential” reasons.

Overall, there was little variation among income levels as far as good reasons to tap home equity. But among those earning less than $50,000 annually, nearly one-quarter said they would tap equity to keep up with regular household bills (23%), compared to just 11% of those making $100,000 or more annually.

“Because mortgage rates have doubled in the past few years, homeowners no longer are tapping equity through cash-out refinances,” Bankrate Analyst Jeff Ostrowski noted. “Instead, they’re leaving their 3% mortgages in place and taking home equity loans or home equity lines of credit to extract some of the value. Rates on home equity loans and HELOCs are about 9%, according to Bankrate data, compared to 7% for mortgages.”