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Low Mortgage Rates + High Home Values: Should You Tap Into Your Home Equity Right Now?

Tuesday, March 15, 2022   /   by Joe Johnson

Low Mortgage Rates + High Home Values: Should You Tap Into Your Home Equity Right Now?


If you own a home, there’s a good chance you’re sitting on a nice chunk of equity. According to this report from Black Knight, the average homeowner got a $48,000 bump in their home value, raising the average equity to $185,000 in 2021.


Considering mortgage rates are still historically low, and home values are high, it can be tempting to tap into your home like it’s an ATM. With hints of rates going up, and values potentially coming down, it can be even more tempting to rush and pull equity out of your house.


Before you do, consider whether or not you should. Take a look at some reasons to tap into your equity, and some reasons not to pull money out of your house:


Good Reasons



    • Home improvements

    • College costs (if the rate is lower than student loan rates you can obtain)

    • Debt consolidation (if you manage credit well and can use it to lower your payments)

    • Emergency expenses

    • Wedding expenses

    • Business expenses


Not So Good Reasons



    • Vacations

    • Buy a car

    • Risky investments (like “hot” stock tips you read online)

    • Pay off credit cards (if it is a recurring problem)


If you determine it makes sense to turn your equity into cash, you have a few options:


Cash-out Refinance


This type of loan allows you to refinance your home for a higher amount than you currently owe, and take the difference in cash. For instance, you owe $100,000, take out a $150,000 loan, and get $50,000 cash. This can be a great option if your current mortgage is at a rate that is higher than current rates, or you have paid down your original loan substantially over time.


Home Equity Loan


These are a second mortgage on your home, usually at a higher rate than the first. Lenders may also be a bit more careful about how much they will lend, since these take second position to your original mortgage if the home is foreclosed on.


Home Equity Line of Credit


These are commonly referred to as a “HELOC.” They’re also a second mortgage, but in the form of a revolving line of credit, much like a credit card. The rate is often variable and fluctuates with changes in the market, but you can find some that are fixed-rate.



The Takeaway:


The current market conditions are favorable for tapping into your home equity if you have a good amount of it. If you decide to do so, just make sure it’s for a good reason. Try not to take out too much equity. Maintaining 20% equity is an ideal benchmark — taking into consideration that values could also drop a bit in the near future — so be safe when estimating how much you’re taking out.


No matter what your reason, only do so if you know you can handle the payments and it won’t put your hard-earned equity and home at risk. And, as always, make sure to seek the advice of your financial advisor, estate planner, and / or real estate agent before turning the equity in your home into cash.

Questions navigating the real estate market? The Reiner Realty Team can help! Call us today at 540-494-9284 or click here.
Reiner Realty Group, Realtors with Lichtenstein Rowan
Rene Reiner
3621 Manassas Drive
Roanoke, VA 24018
540-793-4095
Joel Balsley
NMLS#210455
Licensed in VA
Office #: 540-278-1430
Mobile #: 540-597-8877
joelbalsley@atlanticbay.com


Featured real estate company is not a mortgage lender and so you should contact Atlantic Bay Mortgage Group, L.L.C. directly to learn about its products and your eligibility for such products. The featured lender has an affiliated business relationship with the featured real estate agent. You are under no obligation to use the featured lender for financing. All loans subject to income verification, credit approval and property appraisal. Not a commitment to lend. Atlantic Bay Mortgage Group, L.L.C. NMLS #72043 (nmlsconsumeraccess.org) is an Equal Opportunity Lender. Located at 600 Lynnhaven Parkway Suite 203 Virginia Beach, VA 23452.
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