A few weeks ago, I posted a poll on a WhatsApp chat asking the following question: Would you rather take an instant guaranteed $1 Million or opt for a 50% chance of getting $50 Million instead? The results were split pretty evenly between men and women. Interestingly, a majority of those who responded saying they would take the chance at $50M were under the age of 30, with a majority of those over 30 choosing the guaranteed $1M. I am curious – what would you choose?

A client called me this week to say he wanted to take out a Home Equity Line of Credit (HELOC). After a few minutes of discussing his needs, I mentioned that depending on the purpose of the line of credit, I would have different strategies on which HELOC to pursue. He responded that he wanted to invest the money into the stock market. That is an entirely different conversation. I am curious – would you do that?

Taking out a home equity line of credit (HELOC) can be a smart money move if you’re careful and thoughtful about it. A recent report from Black Knight Data shows that now might be a great time to consider it seriously. The report showed that in 2023, homeowners got a big boost in their home’s equity, with the total value reaching a record high of $16 trillion.

According to the data, on average, homeowners have approximately $300,000 worth of equity in their homes. They also said the combined loan-to-value (debt versus home value) for mortgage holders is 46%, which is remarkably low. To put this into perspective, the average loan-to-value for outstanding mortgages in 2006-08 was probably closer to 90%. This is why, absent a catastrophe, I am very confident in saying that we will not see any housing market crashes.

The report talks about how home prices increased by 5.6% last year, supporting those (like me) who believe the housing market is strong. They indicated, however, that growth might slow down soon, and it might be the right time for homeowners to consider using their home’s equity.

I have often been asked: Is it a good idea to be tapping equity if home prices are slowing or if someone believes the market is softening? Like all good answers, “it depends.” The purpose of your HELOC and what you will be doing with your funds is critical to answer that question. However, just knowing that home prices might soon be softening means that banks will quickly curb and curtail access to lines of credit. So if you want to have a line “just in case,” – now is when you will get the best “bank” for your buck.

Finally, the report also highlighted that refinancing your mortgage in 2024-2025 might be a good idea, especially for those who got their mortgages in 2023. A simple refinance can benefit those who bought their homes with rates in the 7’s. However, with loan rates inching to 6% or lower (before the inflation report came out), many homeowners should start assessing whether consolidating credit card debts and home equity balances into a new first mortgage is worthwhile. Close to 5 million homeowners are projected to benefit from a refinance.

Personal debt has skyrocketed to historical highs. Most households are uncomfortable addressing debt for psychological reasons when they can be fixed with mathematical solutions. If you are unsure whether you are one of the five million homeowners who can benefit from refinancing, please feel free to contact me.

Shoutout and birthday wishes to Rabbi Dovid Bashevkin, Rabbi Gedalyah Berger, Marcus Butler David Feman, Hillel Kaye, Harry Rothenberg, Arielle Sheinbein, and Bracha Udashkin

Shmuel Shayowitz (NMLS#19871) is a highly regarded Real Estate & Finance Executive, Writer, Speaker, Coach, and Advisor. He is President and Chief Lending Officer of Approved Funding, a privately held national mortgage banker and direct lender. Shmuel has over twenty years of industry experience, holding numerous licenses and accreditations, including certified mortgage underwriter, licensed real estate agent, residential review appraiser, and accredited investor, to name a few. Shmuel has successfully navigated through many changing markets and business landscapes, making his market insights and experience well-coveted within the real estate industry. He can be reached via email at [email protected].