No mortgage, no problem: How to access equity without a mortgage

Access your home equity as cash even if your home is paid off ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ [Better] [Better]( This week's mortgage rates [Rate chart] [Rate chart]( Source: US average mortgage rates from [FreddieMac]( --------------------------------------------------------------- Better Mortgage Interested in today's rates? [See Better Mortgage rates]( --------------------------------------------------------------- #FundFact 🏡 The most recent data from the Census Bureau shows that the US homeownership rate is 65.9% as of Q1 2023.¹ Things to know No mortgage, no problem: How to access equity without a mortgage No mortgage, no problem: How to access equity without a mortgage [Rate chart] [Rate chart]( Source: [Transunion]( One of the many rewards of becoming a homeowner is building equity as you pay off your mortgage. Building equity can be even more rewarding for homeowners who are interested in accessing their home equity as cash. Homeowners have accumulated significant amounts of home equity—84M US homeowners have tappable equity in their homes, with a median equity of $240,000.² According to the CFPB, the total number of HELOC originations rose from 962,000 in 2021 to approximately 1.4 million in 2022, a 41.2% increase.³ What is a HELOC? A HELOC, or Home Equity Line of Credit, allows homeowners to access their tappable equity as cash through a revolving line of credit, and uses their home as collateral. This cash can be withdrawn on an as-needed basis, similarly to a credit card. A HELOC is normally a type of second mortgage that allows your primary mortgage to remain untouched, which can be a selling point for homeowners that may have previously snagged a historically low interest rate. First lien HELOCs for homeowners without a mortgage It makes sense that we continue to see an increase in HELOC originations, given that 49% of mortgaged homes in the US are in “equity rich” territory, where their outstanding mortgage balance is only half or less than their home value.⁴ But what about the homeowners that own their homes outright and no longer have a mortgage? For them, there are first lien HELOCs. A lien is a legal claim to an item of property. When you get a mortgage to buy a home, your lender uses the home as collateral. To do this, they place a lien on your home; this is called the first lien, or the primary lien. If you fall behind on your loan payments and default on your mortgage, your lender has the right to repossess the home, sell it, and use the proceeds to pay off your debt. First lien debt holders have a primary claim on your assets, meaning if you were to default on your loan, that creditor would be paid back before all other debt holders—besides tax authorities. If you don’t have a mortgage, or you’ve already paid your home off, you can still access your equity as cash through a first lien HELOC. Typically, the primary mortgage lien sits in the first lien position, but without one, your HELOC would sit in first lien. HELOCs can be used for just about anything, but a good time to consider a first-lien HELOC is when you: - Would like to pay a lower interest rate to consolidate debt — Recent data from the Federal Reserve shows that the average credit card interest rate is 22.16%, with many cardholders paying rates upward of 30+% in interest.⁴ Considering that the average interest rate on a HELOC is 9% (as of October 5th)⁵, consolidating high-interest credit cards with a lower-interest HELOC is a logical move for many homeowners. - Are interested in making renovations to your home — A survey from 2022 found that 43% of homeowners who are planning to renovate intend to use a HELOC or home equity loan to finance the project.⁶ Additionally, 65% of the total respondents are currently planning or have plans to renovate their homes within the next two years.⁶ - Would like to have an emergency source of funds — As a general rule of thumb, experts recommend you have an emergency fund that covers at least 3 to 6 months worth of living expenses.⁷ A HELOC allows you to draw cash as needed so they can be a great resource when it comes to emergency funds because you don’t accrue interest unless you actually withdraw an amount. In addition, you only pay interest on the money you withdraw. For example, if you take out a $100,000 HELOC and only withdraw $75,000 during your draw period, when your draw period is up, you’ll only be responsible for paying back the $75,000 balance plus interest and won’t pay a dollar towards the $25,000 that was untouched! --------------------------------------------------------------- Better Mortgage Want to tap into your home equity? [Apply for a home credit line today]( --------------------------------------------------------------- Press play Follow us on social to stay up to date with the latest mortgage tech, tips, and tools: Watch on [TikTok]( • [Instagram]( • [YouTube]( • [Facebook]( --------------------------------------------------------------- Better Mortgage Questions? Connect with a mortgage expert now [Apply today]( --------------------------------------------------------------- Quiz Who is the best point of contact for a borrower once their loan has funded? - Their lender - Their bank - Their loan servicer - Their real estate agent [Better] [Better] [social]( [social]( [social]( [social]( [social]( ¹ Source: [Census.gov]( ² Source: [Transunion]( ³ Source: [CFPB]( ⁴ Source: [CBS News]( ⁵ Source: [Bankrate]( ⁶ Source: [Housingwire]( ⁷ Source: [Vanguard]( © 2023 Better Home & Finance Holding Company and/or its affiliates. Better is a family of companies. 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