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Where Homeowners Are Offered the Largest and Smallest Home Equity Loans

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While the housing market is finally showing some signs of cooling down, home prices across the U.S. remain high, with Americans sitting on a record $27.8 trillion in home equity. To put that into perspective, that’s about $333,000 worth of equity for each owner-occupied housing unit in the nation.

While most homeowners likely don’t have that much value built into their properties, many are nonetheless tapping into the equity they’ve generated through home equity loans. To better understand how much money homeowners are looking to borrow against their equity, LendingTree analyzed more than 350,000 home equity loan offers to users of our online loan shopping platform from Jan. 1 through July 20, 2022.

We found that the average size of a home equity loan offer is $50,000 or higher in all but one of the nation’s 50 states.

Key findings

  • The average home equity loan offer across the nation’s 50 states is $83,872. Average loan offers vary from nearly $130,000 in Colorado to less than $31,000 in Iowa.
  • Colorado, Hawaii and Connecticut homeowners are being offered the largest average home equity loans. In Colorado, home equity loan borrowers are approved for an average of $128,482. That’s followed by $119,172 in Hawaii and $112,721 in Connecticut.
  • On average, borrowers in Iowa, Alabama and Nebraska receive the smallest home equity loan offers. In Iowa, the average home equity loan amount offered is $30,904, making the Hawkeye State the only state where the average offered loan is worth less than $50,000. In Alabama and Nebraska, borrowers received average loan offers of $55,098 and $56,509, respectively.
  • Offered interest rates on home equity loans can vary notably by state. For example, the average rate of 8.47% offered to borrowers in Alaska — the highest in the nation — is nearly 4 percentage points higher than the average rate of 4.55% offered in Maryland — the lowest in the nation.
  • Like rates and loan amounts, monthly home equity loan payments can vary by state. The highest average payment in the nation is in Hawaii, where home equity loan offers would cost borrowers an average of $1,102 a month. On the other hand, the average home equity loan payment for Iowans would be only $284 a month — the lowest in the nation.

States where homeowners are offered the largest home equity loans

1. Colorado

  • Average offered home equity loan amount: $128,482 
  • Average offered home equity loan interest rate: 5.22% 
  • Average offered home equity loan monthly payment: $552 

2. Hawaii

  • Average offered home equity loan amount: $119,172
  • Average offered home equity loan interest rate: 7.40% 
  • Average offered home equity loan monthly payment: $1,102

3. Connecticut

  • Average offered home equity loan amount: $112,721
  • Average offered home equity loan interest rate: 5.08% 
  • Average offered home equity loan monthly payment: $460 

 

States where homeowners are offered the smallest home equity loans

1. Iowa

  • Average offered home equity loan amount: $30,904
  • Average offered home equity loan interest rate: 7.23% 
  • Average offered home equity loan monthly payment: $284 

2. Alabama

  • Average offered home equity loan amount: $55,098
  • Average offered home equity loan interest rate: 8.44% 
  • Average offered home equity loan monthly payment: $564 

3. Nebraska

  • Average offered home equity loan amount: $56,509
  • Average offered home equity loan interest rate: 8.05% 
  • Average offered home equity loan monthly payment: $556

 


Increased home equity is a tangible benefit of rising home prices

While getting into the real estate market can be challenging when home prices are steep, that doesn’t mean rising prices are all bad news. In fact, rising prices can be a good thing for current homeowners.

For example, the record amount of home equity that homeowners are sitting on is likely the result of how high home prices have climbed since the start of the pandemic. This is because homeowners generate home equity when the value of their property increases above the value of their mortgage. In other words, if property values rise dramatically — as they have since the start of the pandemic — homeowners can generate a significant amount of home equity, even if they haven’t paid off much of their mortgage.

Building equity can yield numerous benefits for homeowners. For example, tapping into equity through a home equity loan or a home equity line of credit can allow homeowners access to cash that they can use for various purposes, from home renovations to paying off higher-cost debts. Having equity can also be beneficial when it’s time to sell your home. The more valuable a home is relative to what was paid for it, the more money a seller will end up making in profit.

Though the prolonged rapid growth of home prices since the start of the pandemic is a cause for concern that should be addressed, the high amounts of home equity that many Americans are sitting on as a result of recent price growth is nonetheless a positive worth recognizing.

Tips for tapping into your home’s equity

Those thinking they want a home equity loan should consider the following tips before applying.

  • Shop around for a lender. Different lenders can offer different rates to the same borrowers. As a result, the first lender a person goes to might not be the lender who can offer them the best rate on a loan. This means that borrowers should shop around and compare rates from different lenders to increase their chances of getting the lowest possible rate on their home equity loan.
  • Consider different types of loans. While a standard home equity loan can be a good option for someone in need of cash, other types of loans like a home equity line of credit — where borrowers are given access to a revolving line of credit that they can borrow from as needed instead of getting a lump sum of cash — are worth considering. Depending on the loan’s purpose, a personal or a small business loan might also be worth considering.
  • Don’t bite off more than you can chew. Even if you have a significant amount of equity built into your home, you shouldn’t rush into getting a home equity loan. If you’re in a situation where you’re having trouble keeping up with your other debts or where you don’t have a stable income stream, rushing to get a new loan might not be the best idea. In a worst case scenario, defaulting on a home equity loan can result in your home being foreclosed.

Methodology

LendingTree analyzed 355,887 home equity loans offered to users of the LendingTree platform across the nation’s 50 states from Jan. 1 through July 20, 2022.

Of importance, this study looked exclusively at home equity loans and not home equity lines of credit (HELOCs). This was done because HELOCs typically have adjustable interest rates, while home equity loans usually have fixed interest rates. Because of this, including HELOCs in our calculations — specifically our average interest rate and monthly payment calculations — could have significantly skewed our findings and made them less accurate.

 

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