Homeowners in several areas of New Hampshire are sitting on several billion dollars’ worth of home equity, a new analysis shows.

More homeowners – and lenders – are turning to home equity loans and lines of credit in the face of historic levels of tappable equity and rising mortgage rates that make cash-out refinances unattractive. 

The historically low interest rates in 2020 and 2021 have left 73 percent of homeowners nationwide with a mortgage rate below 4 percent, according to John Burns Real Estate Consulting.  

Some of the traditional reasons borrowers open HELOCs include house repairs and debt consolidation. With more rate hikes expected as the Federal Reserve attempts to bring down inflation, HELOCs could become a key resource as borrowers look for ways to manage expenses and finances.  

HELOCs provide homeowners with access to a line of credit, similar to a credit card. Not everyone who applies for a HELOC ends up accessing funds.  

The products usually come with an introductory rate for a period followed by a variable rate. During the period when homeowners can draw funds, only interest and fees need to be paid. 

About 1,016 home equity loans or lines of credit were issued in New Hampshire in the first eight months of 2022, up 34 percent over the same period in 2021 according to The Warren Group, publisher of The Registry Review. Refinances during that period dropped 61 percent year-over-year.  

The last time lenders saw mortgage rates increase was 2018, when New Hampshire saw more than 7,000 HELOCs issued over the course of the year.  

But the situation facing borrowers today is different. 

“Home equity per homeowner is much higher than it was back then,” said Eric Finnigan, vice president of research and demographics at John Burns Real Estate Consulting.  

Homeowners in Lebanon and the surrounding areas in both New Hampshire and Vermont are sitting on $2.38 billion in tappable home equity, according to Black Knight, a mortgage technology and data provider. Those in Laconia are close behind with $2.29 billion at their fingertips. In Keene, the figure is $968 million. 

The Greater Boston area – which includes Southeastern New Hampshire by Black Knight’s calculations – had a total of $255.76 billion in tappable home equity in July. That amount has increased since the first quarter of 2022, when the area had $241.97 billion in tappable equity.  

The current rising rate environment also has more homeowners who recently refinanced compared to 2018, Finnigan added.  

Remodeling Financing Likely Needed 

“I think we’re in a particularly interesting time in history right now just because of the record high home equity levels and because of all those homeowners that hold very low mortgage rates that are likely to stay in homes much longer and turn to remodeling rather than moving,” said Matt Saunders, John Burns Real Estate Consulting’s senior vice president of building products research. 

Lenders have traditionally seen home repairs and renovations among the top reasons for customers to seek HELOCs. Finnigan said his research has already shown an increase in HELOCs being used nationwide to fund remodeling projects. 

With first mortgages locked in at record-low rates likely keeping many borrowers in their homes, Saunders said, the housing stock has also reached a point where many homes will be at a prime remodeling age, spurring more home improvement projects.  

The higher levels of home equity could help homeowners keep their first mortgage and use HELOCs to pay for larger projects that typically would have been funded with cash-out refinances, Saunders said. He added that research has shown that rather than smaller do-it-yourself tasks, larger projects have been driving remodeling activity this year. 

Even with the trend toward increased use of HELOCs, some larger projects could end up benefiting from a cash-out refinance, Saunders said. 

“I do think as rates rise, it’s going to increase the cost of borrowing associated with those variable rates [on HELOCs],” Saunders said. “So, there’s not going to be a complete substitution from the refis to the HELOCs; there’s going to be some associated cost of financing weighing on those larger remodels.”