US home equity reached a record $35.8 trillion in 2026, and more homeowners are borrowing against it to fund renovations, pay down high-interest debt, cover education costs or meet household expenses. But rising interest rates are making that borrowing more expensive, putting repayment capacity and exposure to future rate changes at the center of borrowers’ decisions.
Home equity hits $35.8 trillion
Rising home prices and a decade of relatively low mortgage rates helped push US homeowners’ equity to $35.8 trillion in 2026, up 2.2% from 2025 and nearly four times the 2012 level. Federal Reserve data underline how significant home equity has become as a source of household financing.
More than 1 million Americans borrowed against their home equity in the first half of 2026, the highest first-half total since 2022. Data from Intercontinental Exchange show that home equity lines of credit, or HELOCs, remain among the most popular options by both borrowing volume and borrower numbers.
Cash-out refinancing gains ground
Cash-out refinancing has also become more common. The process replaces an existing mortgage with a new loan, allowing homeowners to refinance at a new rate and access some of their equity. In the 12 months through June 30, 2026, the number of homeowners using this option rose 12%. It was up 33% from 2024, while HELOC volume increased just 1% over the same period.
The Federal Reserve raised rates in the fall and signaled that further increases may be possible, adding to the cost of home equity borrowing. Rates on first- and second-lien loans currently range from 7% to 8.5%. Even so, mortgage borrowing may still cost less than some alternatives. Michael Fratantoni, chief economist at the Mortgage Bankers Association, said it can make sense for borrowers to use these loans to pay off higher-rate credit card, student or auto debt.
Choosing between fixed rates and flexible credit
The right product depends on how much money is needed, when it will be used and how much rate risk a household can handle. A fixed-rate home equity loan may suit a large, one-time expense, while a HELOC offers more flexibility when funds are needed in stages. Charley Corbett, a certified financial planner in Naples, Florida, said a home equity loan may fit a single funding need, whereas a HELOC may work better for ongoing, flexible borrowing.
HELOC rates move with market conditions. Steven Rogé, a certified financial planner in Beverly, Massachusetts, cautioned that borrowers should consider whether a rise of one or two percentage points from the initial rate would strain their household budget. The potential effect on monthly payments is worth building into a budget before signing.
Home equity loans, HELOCs and cash-out refinancing differ in both cost and structure. Higher rates have not removed home equity as a financing option, but borrowers need to weigh the purpose of the loan against their ability to repay and the impact that rate changes could have on household spending.