Home Equity Lines of Credit Have Surged in Popularity

Daniella Cressman

Disclaimer: This information is accurate and true to the best of my knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

"Thanks to market conditions, home equity gains are at record highs. In fact, homeowners gained a record-high aggregate of $18.4 trillion in equity during the first three months of 2022, according to TransUnion’s most recent Credit Industry Insights report. That's about $233,000 per homeowner. HELOCs in particular have surged in popularity, increasing by 41% year over year." —Leslie Cook

While Home Equity Lines of Credit—or HELOCs—have their advantages, they also have their downsides.

"The big advantage of a HELOC over a home equity loan, for example, is that you only pay interest on the amount you actually use — not on the entire line of credit. On the downside, the interest rate on a HELOC is typically adjustable. While the initial rate may be low, there is always the risk it could increase multiple times throughout the life of the loan. (You should learn more about the pros and cons of HELOCs and how to qualify before deciding if it's the right choice for you.)" —Leslie Cook

HELOCs have gotten a bad reputation in the aftermath of the Great Recession, but they could be a favorable option for many consumers. Nonetheless, it's important to tread with caution.

"HELOCs got a bit of a 'bad rap' in the aftermath of the Great Recession, says Michele Raneri, vice president of U.S. research and consulting at TransUnion. Homeowners who took out home equity loans and lines of credit on overvalued properties wound up underwater when the market crashed. Since then, however, they’ve been making a comeback, especially now that current mortgage rates have increased by as much as 2 percentage points. Tapping into the equity gained over the past two years can be a more affordable option for accessing cash than refinancing, getting a personal loan or using credit cards." —Leslie Cook

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Canadian-American author writing about local politics, personal finance, & dining in Albuquerque.

Albuquerque, NM

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