Options to Unlock Your Home Equity When Finances Are Tight

DISCLAIMER: As a friendly reminder, this blog post is meant to be used for educational purposes only, not legal or tax advice. If you need assistance navigating the financial or tax implications of unlocking your home’s equity, HomeLight always encourages you to reach out to your own advisor.

With the days of stimulus packages and low mortgage interest rates in the rearview, Americans are steeling themselves for a future with the potential for economic uncertainty.

Increasing inflation on everything from gas to groceries and the reinstatement of student loans and other repayments (paused during the pandemic) are prompting some consumers to explore avenues to maximize their assets if times get tough.

Many homeowners find the greatest financial security lies right beneath their feet.

According to CoreLogic, U.S. homeowners with mortgages (roughly 62% of all properties) saw their equity increase by a total of $1.5 trillion since the first quarter of 2023, a gain of 9.6% over the previous year.

“With the record amount of equity built up in homes over the last couple of years,” says top-performing agent Joseph Lawson of the Cabell Childress Group in Richmond, Virginia, “a lot of people are exploring ways to tap into this access to capital.”

To help you examine your equity’s potential to enhance your financial situation, we’ve asked industry experts to explain the options. With that knowledge, you can be prepared to make the most out of the equity in your most valuable investment.

What is home equity?

“Home equity is the value of your home minus any debt on your home,” explains Lawson.

So, if you own a home that’s estimated to be worth $300,000, and owe $100,000 on your mortgage, then your equity is $200,000.

Since your home’s value changes with the market, your home might be worth more or less than the price you paid.

By using HomeLight’s free online Home Value Estimator, you can generate an up-to-date approximation of your home’s current value in less than two minutes.

While a mortgage is the most common debt, liens (legal claims against the property), back taxes, and outstanding balances owed to other creditors can also reduce your equity.

Also, “If you want to gain access to your equity by selling the home,” Lawson adds, “there are additional expenses related to the transaction of a sale — Realtor commissions, closing costs, etc., — that need to be deducted from your equity estimate.”