JACKSONVILLE, Fla.–Americans are tapping the equity in their homes at the fastest rate in eight years. Homeowners are cashing out, thanks to the booming real estate market and the rapid rise in home values.
Homeowners gained a collective $570 billion throughout 2016, bringing the number of homeowners with "tappable" equity up to 39.5 million, according to an analysis by Black Knight Financial Services. Those borrowers have at least 20% equity in their homes, the company said.
Rising mortgage rates have also led to a downturn in the likelihood of homeowners turning to refinancing, which is further contributing to greater interest in leveraging home equity.
According to Black Knight, about 68% of tappable equity belongs to borrowers with mortgage rates below today's levels. Moreover, three-quarters of these homeowners also have FICO credit scores well above average.
"The last time interest rates rose as much as they have over the past few months, we saw cash-out refinances decline by 50%," said Ben Graboske, executive vice president at Black Knight in a statement.
A recent survey by TD Bank confirms the trend, finding that Millennials, more so than other generations, are most likely to consider applying for a HELC over the next 18 months. That was more than twice the rate as Gen-Xers and nine times that of Baby Boomers who were surveyed.
The number-one reason cited for tapping home equity was home remodeling, followed by debt consolidation.