Tapping home equity is not like using bread, as it won't go stale, says an expert.

• According to Greg McBride, chief financial analyst at Bankrate, home equity is not like bread that goes stale when left unused.
• Experts suggest that tapping home equity is a viable solution for major home improvements or repairs.

As of the first quarter of 2024, homeowners had a total equity of $17 trillion, with the average homeowner gaining $28,000 in equity compared to the previous year, according to CoreLogic.

For many people, there's no need to touch that money.

According to Greg McBride, chief financial analyst at Bankrate, home equity is not comparable to bread as it does not spoil when left unused.

The average consumer now carries $6,329 in credit card debt. This trend in labor data is a "warning sign," according to an economist. A recent report found that 59% of Americans incorrectly believe the U.S. is in a recession.

Experts suggest that tapping home equity can be a viable solution for major home improvements or repairs.

Home equity is 'a less expensive borrowing option'

A recent survey by Bankrate found that 55% of polled homeowners view home improvements or repairs as a justifiable reason to utilize home equity. The survey, conducted on 2,294 U.S. adults, including 1,133 homeowners, was carried out in late June.

Using home equity is a more affordable borrowing option compared to personal loans or credit cards, according to McBride.

According to Bankrate, the current average home equity loan interest rate is 8.59%, while the average HELOC interest rate is 9.37% as of August 7.

According to LendingTree, the average credit card interest rate is 24.92%, while Bankrate found the average personal loan interest rate to be 12.38%.

According to the 2024 U.S. Houzz & Home Study, while cash from savings remains the most common way homeowners fund renovation projects, credit card use has increased. The study surveyed 33,830 homeowners of ages 18 and older from Jan. 19 to Feb. 27.

In 2022, 28% of homeowners used credit cards to pay for their repair projects, but this increased to 37% in 2023, according to Houzz.

Although tapping equity is less expensive, it still carries risks. With the Fed's recent rate hikes, interest rates are higher, and you must have a strategy in place to repay the debt.

Remodeling can add value

Investing in your home using home equity can be a smart move, as it not only maintains the property but can also increase its value, resulting in higher profits when selling.

According to the latest Remodeling Impact Report by NAR, the highest percentage cost recovered for exterior projects was from new roofing, at 100%, while for interior projects, the highest percentage cost recovered was from refinishing hardwood floors, at 147%, and installing new wood flooring, at 118%.

"Lautz stated that hardwood floors are more universally appealing. Roofing projects are significant, and individuals may prefer to have them completed before moving into a home to ensure the roof's functionality."

Tapping home equity for vacations, big purchases

A survey by Bankrate found that over 10% of millennial homeowners believe vacations or large purchases are justifications for utilizing their home equity. However, experts advise against this action.

McBride stated that if you need to fund your vacation, you can't afford to go on vacation.

From the time of purchase, the value of big-ticket items, such as a car or electronics, decreases.

McBride stated that purchasing a depreciating asset involves not only the cost of the asset but also the financing of its purchase.