HELOCs are on the rise: How homeowners can put their equity to work

More homeowners are turning to home equity lines of credit for flexible access to their home equity

Homeowners are increasingly looking to their home equity as a source of financial flexibility, and recent data from the Federal Reserve Bank of New York shows that home equity lines of credit (HELOCs) continue to gain momentum.

According to the New York Fed’s latest Quarterly Report on Household Debt and Credit, HELOC balances increased by $13 billion during the second quarter of 2026, bringing total outstanding HELOC balances to $459 billion. That marks the 17th consecutive quarterly increase and puts HELOC balances $142 billion above their low in the first quarter of 2022.

The trend suggests that more homeowners are recognizing the potential value of having access to their accumulated home equity without necessarily replacing their existing mortgage.

What is a HELOC?

A home equity line of credit is a revolving line of credit that allows homeowners to borrow against the equity they have built in their property. Equity is generally the difference between the current value of a home and the amount owed on the mortgage.

Unlike a traditional home equity loan, which provides a lump sum, a HELOC gives homeowners access to a credit line they can draw from as needed. As the borrowed balance is repaid, available credit can generally become available again. The Consumer Financial Protection Bureau describes a HELOC as an open-end line of credit that allows homeowners to borrow repeatedly against their home equity.

For homeowners who have built substantial equity, that flexibility can be especially useful when a large expense comes up but they do not necessarily need all of the money at once.

Why are HELOCs becoming more popular?

The New York Fed’s data shows that HELOC growth has been remarkably consistent. The second quarter of 2026 represented the 17th consecutive quarter in which outstanding HELOC balances increased. At the same time, aggregate HELOC credit limits increased by another $19 billion during the quarter, continuing an expansion that began in 2022.

This growth comes at a time when many existing homeowners may be reluctant to replace their first mortgage. A homeowner who secured a comparatively low mortgage rate several years ago may not want to refinance the entire mortgage simply to access some of the equity they have accumulated.

A HELOC can provide another option. Instead of replacing the existing first mortgage, a homeowner may be able to establish a separate line of credit secured by the home’s equity.

How homeowners can use a HELOC

One of the biggest advantages of a HELOC is flexibility. Because homeowners generally draw funds only when they need them, a HELOC can be useful for expenses that occur over time rather than all at once.

Some potential uses include:

• Home improvements and renovations
• Major repairs and maintenance
• Education expenses
• Large planned purchases
• Consolidating certain higher-interest debts
• Funding other significant financial needs

For example, a homeowner planning a kitchen renovation may not need the entire project budget on day one. With a HELOC, the homeowner may be able to access funds as expenses arise rather than borrowing the entire amount upfront.

Home improvements can also be an opportunity to reinvest in the property. Projects that improve functionality, address deferred maintenance or enhance the home’s appeal may help homeowners get more value from the property they already own.

Of course, using home equity for any purpose should be carefully considered. Because the home secures the HELOC, homeowners should have a realistic plan for repayment.

A HELOC can help preserve an existing first mortgage

For many homeowners, one of the most compelling benefits of a HELOC is that it can provide access to equity without requiring them to refinance their existing mortgage.

Consider a homeowner who purchased a property several years ago and currently has a favorable first-mortgage interest rate. If that homeowner needs access to $50,000 for a renovation, a cash-out refinance would replace the existing mortgage with a larger loan. Depending on current rates and the homeowner’s circumstances, that could mean giving up the existing mortgage rate.

A HELOC, when available and appropriate, can instead provide a separate source of funds while leaving the first mortgage in place.

This is one reason home equity lending can be attractive in a market where homeowners may be hesitant to refinance.

HELOCs are different from cash-out refinancing

A HELOC and a cash-out refinance both allow homeowners to tap into home equity, but they work differently.

With a cash-out refinance, the existing mortgage is replaced with a new, larger mortgage. The homeowner receives the difference between the new loan amount and the amount needed to pay off the existing mortgage, subject to the loan’s terms and costs.

With a HELOC, the existing first mortgage generally remains in place while the homeowner establishes a separate line of credit secured by the property.

The right choice depends on factors such as the homeowner’s existing mortgage rate, current market rates, available equity, credit profile, financial goals and how much money is needed.

What homeowners should know before opening a HELOC

While a HELOC can be a valuable financial tool, it is still a loan secured by the home. Homeowners should understand both the benefits and the risks before moving forward.

HELOCs typically have a draw period during which the homeowner can access available funds, followed by a repayment period. HELOCs also commonly have adjustable interest rates, meaning monthly payments can change as the interest rate changes.

Homeowners should also pay attention to fees, minimum payment requirements, the length of the draw and repayment periods, and what happens when the draw period ends. The CFPB notes that lenders may charge fees such as application, origination, appraisal, annual or cancellation fees depending on the HELOC.

Most importantly, homeowners should only borrow an amount they can comfortably afford to repay. Because the home serves as collateral, failing to repay a HELOC can put the property at risk.

Home equity can be a valuable financial resource

The continued growth of HELOC balances shows that homeowners are increasingly looking for ways to make their home equity work for them.

With outstanding HELOC balances reaching $459 billion in the second quarter of 2026 and HELOC balances rising for 17 consecutive quarters, the trend is clear: home equity is becoming an increasingly important part of the financial picture for homeowners.

For homeowners considering renovations, major expenses or other financial goals, a HELOC may offer a flexible way to access available equity while potentially allowing them to keep their existing first mortgage in place.

The best option will depend on each homeowner’s financial situation, goals and ability to repay. Speaking with a qualified loan officer can help homeowners compare a HELOC with other options, including a home equity loan or cash-out refinance, and determine which approach may make the most sense. If you are ready to take the next step, start the pre-approval process today.

Sources:
New York Fed 2026 Q2 Household Debt and Credit Report (newyorkfed.gov)
CFPB HELOC overview (consumerfinance.gov)