The Equity Boom: Why Homeowners Can Borrow More Today

Homeowners are entering the spring season with more financial leverage than in previous years. That’s because a whopping number of mortgaged homes are now “equity-rich” – in other words, they’ve accrued at least 50% equity in their properties. If you are among this group, that gives you greater borrowing power.

Let’s take a closer look at the latest findings, how the experts interpret them, what you can do with better borrowing power, and good candidates for tapping home equity.

In this article (Skip article...)

• What new research found
• Increased equity equals more borrowing power
• Why and when you should tap your home equity
• What to assess before tapping home equity
• The bottom line

What new research found

A recent report by ATTOM reveals that an impressive 44.6% of mortgaged residential properties are currently “equity rich,” which means they owed no greater than 50% of their property’s estimated market value.

That’s a major jump from the 26.5% observed right before the pandemic hit – which means average homeowner equity stakes have increased nearly 142% nationwide since 2020. However, these numbers are slightly down from the previous quarter and year-over-year (46.1% in Q3 2025, 47.7% in Q4 2024).

Although the share of equity-rich homes has marginally eased, homeowner equity positions remain robust in several markets. The states with the highest percentages of equity-rich residences are, in order, Vermont, New Hampshire, Rhode Island, Maine, Montana, New York, Massachusetts, Hawaii, California, and Idaho.

“This jump from about 26% to nearly 45% of mortgaged homes being equity rich is one of the biggest shifts in American household wealth I’ve seen in my career,” says personal finance expert Andrew Lokenauth. “That’s not a small nudge – it’s a structural change. What this report is really telling us is that tens of millions of homeowners now sit on a financial cushion that flat-out didn’t exist five years ago.”

Erik Leland, a real estate broker with Realty First in Lake Oswego, Oregon, seconds those sentiments.

“If you zoom out, the findings represent a massive change in how we look at middle-class household wealth,” he explains. “Seeing that the number of equity-rich homeowners is so much higher than it was pre-pandemic is remarkable.”

Factors behind this trend

Eric Bernstein, president/cofounder of LendFriend Mortgage, says there’s a big reason why so many homeowners nowadays enjoy a bountiful bed of equity.

“This is a testament to the unprecedented financial situation homeowners are in, having accumulated this wealth during the pandemic housing boom, where housing prices rose by 30% to 50%,” he explains. “Millions of homeowners leveraged historically low mortgage interest rates during this boom. When rates rose by 4% or more after 2022, many homeowners did not abandon ship and sell their homes. They continued to make mortgage payments on houses that are worth much more than they paid for.”

Additionally, plenty of homeowners made home improvements and renovations over the last few years, which further improved their home equity positions.

“Remember, as well, that a lot of homeowners refinanced into low fixed rates a few years ago, which encouraged them to stay put longer and continue building equity,” notes Taylor Kovar, a Certified Financial Professional.

Combine that with the fact that few want to trade a 3% mortgage for a 6% or higher mortgage (what experts call the “lock-in effect”), and it makes sense that equity continues to compound for millions of property owners who have yet to list their homes for sale.

How increased home equity equals more borrowing power

Home equity represents available capital based on your loan-to-value percentage. Typically, up to 80% to 85% (depending on the lender) of your home’s value is available to borrow by tapping your equity.

“Let’s say you purchase your home for $500,000 with a mortgage of $400,000. Then, you reduce your mortgage balance to $360,000 over a few years; meanwhile, over that time, your property increases in value to $700,000. An 80% loan-to-value means you can borrow up to $560,000 of your home’s current higher value. Because you still owe $360,000 on your mortgage, that means you can access up to $200,000 of your home’s equity,” continues Bernstein.

Many opt to liquidate home equity via a home equity line of credit (HELOC) or a home-equity loan. A HELOC acts as a flexible revolving credit source, similar to a credit card but secured by your home’s equity. During an initial “draw period” – often the first 10 years – you can withdraw funds as needed up to a limit determined by your debt-to-income ratio and credit score. While you typically pay interest only on the amount actually borrowed during this phase, a HELOC features a variable interest rate tied to the prime rate. This means your monthly payments can fluctuate significantly, especially once the draw period ends and you enter a repayment term that may exceed 20 years.

A home equity loan, on the other hand, functions as a “second mortgage,” providing a lump sum of cash upfront based on the value of your home minus your current mortgage balance. Because your property serves as collateral (as is true of a HELOC), you can typically borrow up to 85% of your home’s value, though you risk foreclosure if payments are missed. These loans are characterized by stability, offering fixed interest rates and consistent monthly payments of both principal and interest over a repayment term that usually spans five to 15 years.

Current average interest rates for either product typically range between 7% and 8%, which is lower than what many personal loans charge (often 10% to over 14%) and much lower than average credit card rates (more than 22%).

“HELOC originations have picked up lately,” says Lokenauth. “That’s logical, as it often doesn’t make sense to refinance your entire mortgage when you can carve off just what you need at a lower blended cost. Cash-out refinances are far less attractive today because most homeowners hold fixed mortgage rates below 4% that they’re not willing to give up. Home equity loans and HELOCs are the better play in this rate environment because they are more flexible.”

Why and when you could consider tapping your home equity

Liquidating home equity can improve your lifestyle and your home’s worth at the same time.

“Some invest in home improvements by, for instance, adding bedrooms and bathrooms to meet the increasing needs of their families, allowing them to stay in their favorite neighborhoods without moving to another place,” Bernstein says. “Home equity can also be used during major transitions in your life, such as pursuing a ‘buy before selling’ strategy whereby you purchase a new home without needing to sell your existing home on short notice.”

Tapping home equity can also be smart if you want to consolidate other debts being charged at higher rates, such as if you have unpaid high balances on multiple credit cards. Additionally, it can come in handy if you want to fund a new business or investment, such as a down payment on a rental property.

“The best candidates are homeowners with stable income, strong credit, at least a 20% equity position that remains after borrowing, and a specific plan for the funds,” Lokenauth adds. “Poor candidates are those using equity to fund lifestyle spending – such as using the funds for vacations, cars, or covering monthly cash gaps. Remember that your home serves as collateral: If you cannot repay, you don’t just lose points off your credit score, you lose your home.”

What to assess before tapping home equity

Pay close attention to the fine print on a HELOC or home equity loan before pulling the trigger.

“It helps to look closely at the loan terms and how the payments fit into your long-term plans,” Kovar notes. “Some HELOCs have variable interest rates, which means payments can change over time. Fees and closing costs can also vary, depending on your chosen lender. You need to take time to understand the structure of the financing and how the funds will be used so you can make a more informed decision.”

Leland believes now represents an opportune time to cash in your home equity, if you are a good candidate.

“The slight softening we are seeing in the equity-rich data year-over-year is a call to action. We are currently at a three-year low for HELOC rates, and housing inventory is more balanced. But property values are no longer climbing at a record pace,” he says. “If you’ve been waiting to tap your equity to consolidate debt or improve your home, the window of maximum leverage might be right now before things normalize further. A good first step is to find out exactly how much equity you have in your house today, and then work with a trusted financial planner to strategize your best options.”

The bottom line

Homeowners today are sitting on more equity than they have in years, which can translate into greater borrowing power through options like HELOCs and home equity loans. That equity can be useful for funding renovations, consolidating debt, or covering major expenses.

But tapping it still means borrowing against your home, so it’s important to weigh your budget, repayment plan, and long-term financial goals before moving forward.