
By Ashley Gower
Feb 1, 2025Have you ever stopped to think about how much wealth you’ve built up just from being a homeowner? Especially if you became a homeowner in 2022 or earlier. As home values rise, so does your net worth. And, if you’ve been in your house for a few years (or longer), there’s a good chance you’re sitting on a pile of equity — maybe even more than you realize.
Home equity is one of the most powerful financial tools available to homeowners. Simply put, it’s the portion of your home’s value that you own outright—calculated by taking your home’s current market value and subtracting the balance of your mortgage.
For example: If your house is worth $500,000 and you still owe $200,000 on your home loan, you have $300,000 in equity.
As you make mortgage payments or if your home’s value increases, your equity grows. Think of it as a savings account built into your home, with potential to help you achieve financial goals such as funding a renovation, consolidating debt, or even investing in another property. For many, home equity is the largest source of wealth they will ever have. Understanding how it works and why it’s increasing for so many homeowners is key to making the most of this valuable asset.
Homeowners across the U.S. are reaching record levels of equity. Here’s a snapshot of the current landscape:
- $11 trillion: The total tappable home equity held by U.S. homeowners—a record high.1
- $206,000: 48M U.S. homeowners with mortgages have some level of such tappable equity, at an average of $206K per borrower.2
- 3%: The percentage of mortgaged homes in the U.S. that are considered equity-rich, meaning the homeowner owes less than 50% of the home’s current value.3
Why Homeowners Are Gaining So Much Equity
Over the last several years, homeowners have experienced a surge in equity growth, thanks to a combination of skyrocketing home values and long-term ownership trends. Let’s break down why so many people are building wealth through their homes:
1.Rising Home Prices are Driving Equity Growth
Home price appreciation has been a game-changer for equity growth. Nationwide, the median home price has increased by 57.4% over the past five years, largely due to high demand and a tight supply of home (see map below):

This appreciation means your house is likely worth much more now than when you first bought it. This dramatic rise means that even homeowners who purchased their properties relatively recently are now sitting on significant equity.
2. Longer Homeownership Boosts Equity
- Homeowners are staying in their homes longer than ever before, with the average length of ownership increasing to over 10 years, compared to just eight years a decade ago. This trend of long-term ownership allows equity to grow steadily as homeowners pay down their mortgages and benefit from ongoing appreciation. This shift toward holding onto homes longer has been especially impactful, as it gives people more time to build equity and accumulate wealth.
Data from the National Association of Realtors (NAR) shows people are staying in their homes for a decade (see graph below):

3. Wealth Accumulation Over Time
- The combination of rising home prices and longer ownership has transformed home equity into a powerful wealth-building resource. For many homeowners, their equity represents the single largest portion of their net worth, creating opportunities to reinvest in their homes, fund major life events, or establish financial security for the future.
With a total of $11 trillion in usable home equity across the country, there’s no question that the housing market has rewarded homeowners who’ve stayed the course. If you’ve owned your home for several years, now is the time to understand how much equity you’ve gained and how it can work for you.
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Ways to Use Home Equity
Your home equity can be a powerful tool, offering financial flexibility and opportunities. Here are some ways homeowners can take advantage of their equity for today and ways to use home equity to build wealth:
1.Pay Off High-Interest Debt
One of the most impactful ways to use home equity is to consolidate high-interest debt, such as credit cards, into a loan with a lower interest rate. This strategy not only simplifies your finances but can also lead to significant savings over time.
Consider Danielle’s story. A few years ago, she faced an unexpected family emergency. To cover medical expenses and related costs, she relied heavily on her credit cards. The balances grew quickly, and with interest rates climbing over 20%, her minimum payments barely made a dent. The debt felt overwhelming, and the stress of juggling multiple payments each month took a toll.
Danielle discovered she could use the equity in her home to consolidate her debts through a cash-out refinance. Even though the new mortgage rate was higher than her original home loan, it was significantly lower than her credit card interest rates. By rolling her high-interest debts into her mortgage, she reduced her monthly payments and saved thousands in interest over the life of the loan.
This approach doesn’t just offer financial relief; it provides emotional peace of mind. Instead of managing several high-interest debts, Danielle now makes a single, manageable payment each month. The clarity and control she gained have made a remarkable difference in her life.
If you’re carrying high-interest debt, consider how your home equity could work for you. While it’s important to weigh the pros and cons, consolidating debt through a cash-out refinance might be the key to reducing financial stress and regaining control over your finances.
2.Support Life Events
Major milestones often come with significant expenses, and home equity can be a resource to fund:
- Higher education tuition.
- A wedding.
- Caring for a loved one.
- Hospital bills
When used wisely, your home equity offers financial options that can ease the burden of life’s big moments while keeping your long-term goals in focus.
3.Upgrade Your Home
Planning to move? Your equity can serve as a sizable down payment on your next home or even help you purchase it outright in cash. Leveraging equity in this way can make it easier to secure your dream home or transition to a property that better fits your needs.
4.Fund Home Improvements
A common reason borrowers have for taking out home equity loans is to fund property improvements and upgrades. In general, building up equity in your home is based on:
- Making monthly mortgage payments
- Growth in home value over time
- Making repairs and maintaining the state of your buildings and land
The fourth and optional way to grow equity is to enhance your property with remodels and additions. Remodeling doesn’t usually provide a 100% return on its cost, but if you invest in upgrades that both enhance your current enjoyment of the property and add value to it, you’ll be building security and future wealth.
Consider these popular remodels, and how much you can expect to recoup from them based on national averages:
- Garage door replacement: Cost $4,041 | Value $3,769 (93.3%) – Remodeling. 2022 Cost vs. Value Report.
- Manufactured stone veneer: Cost $11,066 | Value $10,109 (91.4%)
- Minor kitchen remodel using midrange materials: Cost $28,279 | Value $20,125 (71.2%)
You may also be able to deduct home equity loan interest from your federal income taxes if the loan proceeds are used to “buy, build or substantially improve the taxpayer’s home that secures the loan,” according to the IRS. ( IRS. Interest on Home Equity Loans Often Still Deductible Under New Law.
According to the 2022 Remodeling Impact Report by the National Association of REALTORS® and the National Association of the Remodeling Industry, these types of projects not only improve your property’s resale value but also increase your enjoyment of the space.
5.Invest In Real Estate
Many homeowners find themselves asking, “Is it a good idea to invest in home equity?” The equity you’ve built in your home can be a powerful tool to further your financial growth. Capitalizing on the gains you’ve seen from your initial homeownership can be a strategic move, especially if you’re looking to invest in other property types, such as:
- Rental property
- Property to fix up and flip for a profit
- Commercial investment property
While you’ve missed the 2020–2021 drop in interest rates, 30-year fixed mortgage rates continue to be a profit-generator for the long haul, especially if you own a rental property that produces enough revenue to provide you with monthly income.
6.Add a Rental Unit to Your Property
Let’s do a mash-up of the last two above—have you considered designating or building space you can rent out on your land? This could include:
- An apartment with separate entry in a basement, attic, or over a garage
- Storage or working space in a garage or shed
- Studio or office space
A contained living space on the same lot as a detached single-family home is also called an accessory dwelling unit (ADU). If you already have a structure or the space to convert—and are willing to deal with renters—you may be able to boost your equity immediately by more than the construction cost.
For instance, a garage conversion ADU costs $100,000–$150,000 to make tenant-ready, while adding the ADU increases property value by $158,000 on average. (Homestead. ADUs: The Best Investment You Can Make in 2022. )
7.Start A Business
If you’re ready to pursue an entrepreneurial dream, your home equity can provide the capital to launch or expand a business. This option allows you to access funding without taking on additional personal or business loans.
Whether you’re ready to ditch white-collar life and buy a franchise, fund a start-up, or take advantage of home-based tax write-offs with a new side hustle, you can use your home’s equity to fund it. If you’re just starting to explore the idea, keep in mind that some types of businesses take years to bring in a profit.
Be sure to protect your assets with:
- A business structure that doesn’t put your personal home at risk
- The right mix of business and liability insurance
- Conservative income projections that ensure you can pay off property-secured debt
Put Your Equity To Work For You!
Your home equity in 2025 could be one of your most powerful financial tools. Whether you’re looking to consolidate high-interest debt, cover unexpected life events, or invest in new opportunities, understanding and leveraging your equity can open doors to greater financial freedom.
Take the time to evaluate your current equity position, explore your options, and consult with a financial advisor if needed. By making informed decisions, you can ensure your home equity works not just as a number on paper, but as a dynamic asset that supports your financial goals for years to come.
Let’s discuss your goals and help you take the next step.
1.ICE May 2024 Mortgage Monitor Report
2.ICE May 2024 Mortgage Monitor Report
3.ATTOM Data Solutions Q3 2024, Home Equity & Underwater Report
Equal Housing Lender. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. The pre-approval may be issued before or after a home is found. A pre-approval is an initial verification that the buyer has the income and
assets to afford a home up to a certain amount. This means we have pulled credit, collected documents, verified assets, submitted the file to processing and underwriting, ordered verification of rent and employment, completed an analysis of credit, debt ratio and assets, and issued the pre-approval. The
pre-approval is contingent upon no changes to financials and property approval/appraisal.
*Veterans Affairs loans require a funding fee, which is based on various loan characteristics. Sales price cannot exceed appraised value. Refinancing an existing loan may result in the total finance charges being higher over the life of the loan. Offers may vary and are subject to change at any time without notice. Interest rates are subject to change daily and without notice. LTV’s can be as high as 96.5% for FHA loans. FHA minimum FICO score required. Fixed rate loans only. W2 transcript option not permitted. For USDA loans, 100% financing, no down payment is required. The loan amount may not exceed 100% of the appraised value, plus the guarantee fee may be included. Loan is limited to the appraised value without the pool, if applicable. *Veterans Affairs loans require a funding fee, which is based on various loan characteristics. Sales
price cannot exceed appraised value.
These blogs are for informational purposes only. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. Offers may vary and are subject to change at any time without notice. Should you have any questions about the information provided, please contact us.