"Some $78.40 billion of new commitments for home equity lines of credit [HELOCs] and closed-end second liens [home equity loans or HELOANS] were originated during the second quarter, a 20.4% increase from the first three months of the year," according to Inside Mortgage Finance last Friday.
Meanwhile, during the first six months of this year, use of those home equity products was up by 11.8%, compared with the same period last year, says Inside Mortgage Finance. HELOCs dominated this form of lending, accounting for 80.5% of all home equity products.
Why HELOCs and Home Equity Loans Are Becoming More Popular
There seem to be two main drivers behind this surge in home equity usage. First, American mortgage holders collectively hold $18 trillion in home equity (the amount by which a home's market value exceeds the balances on the loan(s) the property secures) — an all-time record.
And secondly, rising mortgage rates are deterring consumers from using cash-out refinances, which used to be a go-to way for homeowners to tap into their equity. While a HELOC or home equity loan will have a rate that reflects current market conditions, that will apply only to new borrowing, leaving the existing low-rate mortgage intact.
A cash-out refinance, on the other hand, involves scrapping the existing lower-rate mortgage and replacing it with a whole new one with today's rates. For most homeowners, that means paying a higher rate on a much larger sum — perhaps several hundred thousand rather than maybe tens of thousands on a home equity product.
"Mortgage holder equity hitting $18 trillion is a remarkable milestone — one that reflects just how much wealth American homeowners have built," said Andy Walden, head of mortgage and housing market research at ICE, in a news release accompanying its August 2026 Mortgage Monitor Report.
"The spring market provided a meaningful boost to both prices and equity, and we're seeing those tailwinds work through the data now. At the same time, rates have trended higher since early in the year, which may soften how much additional acceleration we're likely to see in the second half."
Advantages of Home Equity Borrowing
Last month, CBS News provided three reasons why homeowners might wish to turn to home equity borrowing:
- All those trillions mean many longer-term homeowners can access large sums, sometimes hundreds of thousands of dollars. "This much funding isn't nearly as accessible if you choose to borrow it with a personal loan or a credit card," says CBS. "And, even if you could qualify for a $200,000 personal loan or a credit card with a line of credit that high, the rate you'll pay to secure it will be considerably higher than just the average rates you can otherwise secure now with a home equity loan or HELOC."
- HELOCs tend to have variable interest rates, and home equity loans typically have fixed rates. So, homeowners have options to manage their risk depending on whether they think interest rates will rise or fall.
- HELOCs and home equity loans tend to have much lower interest rates than alternative types of borrowing. "The average personal loan interest rate is over 12% while the average credit card interest rate is over 22% this September," said CBS. "And those are averages, meaning that borrowers without good credit scores could expect to qualify for even higher interest rates." As of September 30, Bankrate's national average HELOC rate was 7.29%, while its national average home equity loan rate was 8.46%.
Many personal loan lenders advertise rate ranges starting at 6.49% or even lower. However, vanishingly few borrowers are likely to qualify for such rates. Creditworthy applicants can apply, but most will likely find that a home equity loan or HELOC will deliver a lower rate than a personal loan can.
Not All Homeowners Qualify for Home Equity Borrowing
Of the $18 trillion of equity homeowners share, "only" $11.7 trillion is defined by ICE as "tappable" equity, meaning it can be accessed via a HELOC or home equity loan. That's in the hands of 47.5 million mortgage holders.
Borrowers will be lucky to find a lender that will allow them to use all their equity to secure a home equity product. The vast majority will require them to retain an equity cushion, which is a percentage of the home's value that can't be borrowed against.
So, those with little or no home equity will normally find their applications for home equity products declined. And those with negative equity (their homes are worth less than their mortgage balance(s)) stand no chance. Unfortunately, the number of borrowers with negative equity is rising.
"Despite the strong overall picture, approximately 813,000 borrowers are underwater — up 44% year-over-year — concentrated among FHA and VA borrowers, those who purchased between 2022 and 2025, and in Texas and Florida, where price declines from peak have been most pronounced," said ICE's news release.
However, homeowners wanting just a few thousand dollars may be better off with a personal loan. They tend to have easier application processes and lower set-up costs.
Is Borrowing a Good Idea?
Borrowing to maintain an unaffordable lifestyle should raise huge red flags. Unless the underlying cause (overspending) is addressed, the borrower will soon need another injection of cash and then another and then another. That rarely ends well.
So financial gurus generally advise those borrowing to consolidate debts or fill a financial hole, to review their household budgets and solve their problems in advance of applying for a loan. Borrowers may still need the extra cash, but they have a plan to make it a one-time requirement.
However, there may be times when borrowing is a good thing. For example, one may wish to fund home repairs or improvements to maintain the value of one's property, invest in a rental property, or gain a professional qualification that will enhance future earnings.
In those circumstances and others, affordable and carefully managed borrowing can be a good thing. Then the borrower's goal should be to secure the lowest possible interest rate and best overall deal, including costs. Often, HELOCs and home equity loans are the answer.
