Knock, knock – is the equity in your home calling?

(Feb. 21, 2025) — Sixty percent of U.S. homeowners have at least $100,000 in tappable equity in their home – the highest level of home equity since 1958.

This is important because about 60% of U.S. homeowners are sitting on mortgage interest rates of 4% or lower. With current interest rates above 6.96%, this leaves 60% of homeowners unwilling to tap that equity due to higher interest payments that lead to higher monthly mortgage payments.

But many homeowners are also struggling with high credit card debt, expensive car loan payments and the cost of needed home repairs. One way to manage these expenses more effectively, without touching that 4% first mortgage, is by leveraging your home equity through a Home Equity Line of Credit (HELOC).

A HELOC works a lot like a credit card using the equity in your home. It is a recorded second deed of trust against your home, very similar to your first mortgage.

You are given a set credit line and you can borrow as needed, rather than taking it all at once. You only make payments on the money you borrow, not the full equity line.

Typically, the interest rate is much lower than credit cards because your house is used as collateral.

This is an adjustable-rate loan, meaning the interest rate can go up or down depending on if the Federal Reserve increases or decreases its fund rate.

If you don’t want an adjustable mortgage, another option to tap your equity is through a Closed End Second Mortgage. This mortgage works just like your primary, 30-year loan.

You borrow a lump sum, based on the available equity in your home, and pay it back in the same monthly payments over time – normally 30 years. The interest rate is fixed, so your monthly payment is predictable. If rates go down, you can refinance this loan to lower your monthly payment.

But unlike a HELOC, you have to take all of the funds at once. You can’t pay back a portion of the money and then withdraw it again later.

Both of these types of loans come with several borrowing options and interest rates that are much lower than credit cards and less costly than pulling cash out from your higher interest income generating accounts.

Consolidating your debt into one lower monthly payment will give you more breathing room in your monthly budget. Reducing your credit utilization could boost your credit score, as well.

To learn more about these types of loans, please reach out today at 925-487-0908 or email Anna@Stonecastlemtg.com for a free evaluation.