Should You Tap Your Home Equity? When It Makes Sense and When It Doesn’t
Should You Tap Your Home Equity? When It Makes Sense and When It Doesn’t
This guide breaks down when borrowing against your home is worth considering, when it isn’t, and how to match the right product to the right goal.
Written by
Lorraine Roberte
Lorraine Roberte is a trusted debt and mortgage expert for Besmoney.com. As the CEO and Founder of Crafty Writing, she specializes in personal finance and insurance content. She has written for leading publications like AAA, GoodRx, Investopedia, PNC Bank, CNN Underscored, Bankrate, and many more. She does the hard work of breaking down complex financial topics like loans, mortgages, debt, and insurance coverage to help readers make confident decisions.
American homeowners are sitting on more equity than ever. Mortgage holder equity reached $18 trillion in the second quarter of 2026, a new all-time high, according to ICE’sAugust 2026 Mortgage Monitor report.
Of that total, 47.5 million mortgage holders have a combined $11.7 trillion in “tappable” equity—the amount they could borrow against while keeping a healthy 20% ownership stake.
For many homeowners,home equity is a substantial financial resource that sits mostly untouched. Whether it makes sense to tap yours depends on why you need the money, which product fits your situation, and what you’re willing to risk.
Key Insights
Mortgage holder equity hit a record $18 trillion in Q2 2026, with $11.7 trillion of it considered tappable across 47.5 million borrowers.
Home equity products carry meaningfully lower interest rates than credit cards, which makes them a common tool for consolidating high-cost debt.
HELOC balances have grown for 17 straight quarters, but the number of underwater borrowers rose 44% over the past year, so tapping equity isn't risk-free.
The right product (a home equity loan, a HELOC, or a cash-out refinance) depends on how much you need, how you plan to repay it, and whether you want to keep your current mortgage rate.
How Much Equity Do Homeowners Actually Have?
Among homeowners with a mortgage,average equity reached $310,000 in the second quarter of 2026. Rising home prices are a big reason. Home prices rose 1.5% over the year ending in July, the fastest annual growth in 14 months, and kept climbing even as the 30-year mortgage rate ranged fromabout 6.2% to 6.5% from April through June.
As equity has grown, so has the amount homeowners borrow against it.Home equity line of credit (HELOC) balances hit $459 billion in the second quarter, the 17th straight quarterly increase. That's less than 4% of tappable equity, which suggests most of it is still untouched.
Why Aren't More Homeowners Tapping Into Their Home Equity?
Two things hold many homeowners back:
The cost and commitment:Home equity loans, HELOCs, andcash-out refinances all put a lien on your house and come with closing costs. The repayment is also more serious than on a credit card or personal loan, because your home is the collateral.
Uncertainty about when it's worth it: Many homeowners simply don't know when tapping equity is the better move and when it's the worse one. The answer depends on what the money is for and how you plan to repay it, which the sections below cover.
When Does It Make Sense to Tap Your Home Equity?
Homeowners most often consider tapping equity for three reasons: repairs, debt consolidation, and major expenses. Here's how the tradeoffs look for each.
Home Repairs and Improvements
Homeowners are projected to spend about $519 billion a year on home improvements and repairs through mid-2027, according to the Leading Indicator of Remodeling Activity (LIRA) from Harvard'sJoint Center for Housing Studies. Whether equity is the right way to pay depends on the project:
Necessary repairs: A roof, HVAC system, or structural issue can justify it, since the work may also protect or add to the home's value. Equity products typically carry lower rates than unsecured financing, so you'll likely pay less in interest than on a credit card.
Cosmetic upgrades: This is a more personal call. Weigh the cost of borrowing against how much value the project is expected to add.
From My Experience: When we renovated our first home, we saved up and paid cash for most of the work. It took about six years, and since we did much of it ourselves, it was mentally and physically exhausting. We sold the house about two years after finishing, so we didn't get to enjoy it as long as we'd planned. Looking back, I wish we'd used our home equity to get the work done sooner. That's what I'd advise most homeowners to consider if it makes financial sense and aligns with their goals.
Debt Consolidation
This is where the math tends to be most persuasive. Compare the average rates:
Credit cards carrying a balance:22.15% in the second quarter of 2026.
Rolling high-interest credit card debt into a lower-ratehome equity loan or HELOC can meaningfully cut what you pay in interest. But it converts unsecured debt into debt secured by your home, so it only pays off if you don't run the credit cards back up.
If you'd rather not borrow against your home,debt consolidation loans skip the lien. They carry a higher rate than home equity financing, which may be a worthwhile trade-off if you don't want your home as collateral.
Major Expenses
Tuition, medical bills, and funding a new business are common reasons homeowners tap equity for a lump sum they can't easily cover from savings. Because these draws tend to be large and one-time, a fixed-rate home equity loan, with predictable payments over a set term, often fits better than a variable-rate HELOC.
Expert Tip: I strongly suggest exploring other paths before using your home equity to pay for student loans or medical bills. A nonprofit credit counselor can help you compare your options for free or at a low cost. Other options to look at first:
Federal student loans: An income-driven repayment plan could make monthly payments more affordable.
Private student loans: You may be able to refinance for better terms and a lower rate.
Medical bills: Look into hospital payment plans and financial assistance. Providers usually have to sue you and win a court judgment before they can put a lien on your home, and some states, includingNew York andMaryland, bar liens on a primary residence for medical debt. If you pay the bill with home equity, you've put your house on the line if you can't repay the loan.
Interest on home equity debt used for non-home-related purposes generally isn't tax-deductible, so confirm your situation with a tax professional before assuming a deduction applies.
Which Home Equity Product Fits Your Situation?
There are three main ways to access home equity. The right one depends on how much you need, whether you want a lump sum or ongoing access, and whether you're willing to give up your current mortgage rate.
Home equity loan: A fixed-rate lump sum, repaid in set monthly installments over a fixed term. Best for one-time expenses with a known cost, like a major repair or adebt consolidation payoff.
HELOC: A revolving, typically variable-rate line of credit you draw from as needed. Best for ongoing or uncertain costs, like a multi-phase renovation.
Cash-out refinance: Replaces your entire first mortgage with a larger one, and you keep the difference in cash. Best for homeowners who want a single loan and are comfortable resetting their mortgage rate.
The mortgage rate is the main catch with acash-out refinance. It can make sense if current rates are close to what you're already paying. It's typically a worse option if it means giving up a rate well below today's market, which describes a large share of existing homeowners.
What Are the Risks of Tapping Your Home Equity?
Borrowing against your home isn't without downside. Every home equity product is secured by your house, so missed payments carry more serious consequences than missed payments on a credit card or personal loan.
Some Homeowners Have Little or No Equity to Tap
ICE found that roughly 813,000 borrowers were underwater on their mortgages as of Q2 2026, up 44% year over year. Many are FHA and VA borrowers who bought between 2022 and 2025.
Others are in Texas and Florida, where price declines from local peaks have been steepest. The average borrower has plenty of equity, but averages hide the many homeowners who have far less.
Most Borrowers Are Keeping Up With Payments
The share of HELOC balances moving into serious delinquency was 1.15% in the second quarter of 2026, unchanged from a year earlier, according to the New York Fed'sQ2 2026 household debt report. That suggests most borrowers who tap their equity are managing the payments.
Still, test the payment before you borrow.
Available Equity Isn't Affordable Equity
I encourage homeowners to stress-test the payment using a higher potential rate and reduced household income, while still leaving room for their regular expenses and emergency savings. If the payment only feels comfortable with today's rate and a full paycheck, the amount may be too high—available equity isn't automatically affordable equity, especially when the debt is secured by their home.
Kathie "Kat" FishLicensed Mortgage Loan OriginatorEdge Home Finance, LLC
How to Tap Your Home Equity: Steps Before You Apply
Decide what the money is for and how you want to borrow it. Pin down the purpose first, then choose between a fixed payment (a home equity loan) and the flexibility to borrow as you go (a HELOC). Reviewhow home equity loans work if you’re weighing the two.
Check that you meet typical lender requirements.Most lenders want to see: A combined loan-to-value ratio under 80% to 85% A credit score of at least 680 (minimums vary by lender and loan program) Adebt-to-income ratio that leaves room for the new payment
Compare offers from several lenders. Rates and fees can vary meaningfully for otherwise similar borrowers, socomparing offers across multiple lenders can save you money over the life of the loan.
Your Questions, Answered (FAQs)
What is tappable home equity?
Tappable equity is the portion of your home's value you could borrow against while still keeping at least 20% ownership in the home. In Q2 2026, 47.5 million mortgage holders had a combined $11.7 trillion in tappable equity.
Is it smart to use home equity to pay off credit card debt?
It can be. Credit cards carrying a balance averaged 22.15% in Q2 2026, compared with about 7.53% for HELOCs and 7.69% for home equity loans in September 2026. But consolidating turns unsecured debt into debt secured by your home, so it only pays off if you don't run the credit card balances back up.
What's the difference between a home equity loan and a HELOC?
A home equity loan gives you a fixed-rate lump sum that you repay in set monthly installments, which suits one-time expenses with a known cost. A HELOC is a revolving line of credit, usually with a variable rate, that you draw from as needed, which suits ongoing or uncertain costs like a multi-phase renovation.
When does a cash-out refinance make sense?
A cash-out refinance replaces your current mortgage with a larger one and pays you the difference in cash. It can make sense if today's rates are close to what you already pay. It's usually a worse choice if it means giving up a mortgage rate well below the current market.
What do I need to qualify for a home equity loan or HELOC?
Most lenders look for a combined loan-to-value ratio under 80% to 85%, a credit score of at least 680, and a debt-to-income ratio that leaves room for the new payment. Exact minimums vary by lender and loan program.
Is home equity loan or HELOC interest tax-deductible?
Generally, interest is only deductible if you use the money to buy, build, or substantially improve the home that secures the loan, and you itemize your deductions. Interest on money used for other purposes, like paying off credit cards or tuition, generally isn't deductible. Check with a tax professional about your situation.
What happens if I can't repay a home equity loan?
Because your home is the collateral, missed payments carry more serious consequences than on a credit card or personal loan, and continued nonpayment can ultimately lead to foreclosure. Before you borrow, stress-test the payment against a higher rate and lower household income to make sure you can afford it.
Why Trust BestMoney?
This guide was written by Lorraine Roberte, a personal finance writer who specializes in mortgages, home equity, and consumer debt. Her work helps homeowners understand what their equity is worth and how it compares with other ways to borrow before they put their home on the line.
Together with BestMoney's rigorous editorial standards, this guide gives you an unbiased, accurate, and practical roadmap for deciding whether, and how, to put your home equity to work.
Lorraine Roberte is a trusted debt and mortgage expert for Besmoney.com. As the CEO and Founder of Crafty Writing, she specializes in personal finance and insurance content. She has written for leading publications like AAA, GoodRx, Investopedia, PNC Bank, CNN Underscored, Bankrate, and many more. She does the hard work of breaking down complex financial topics like loans, mortgages, debt, and insurance coverage to help readers make confident decisions.
