The amount of tappable mortgage equity increased in 2017 to an all-time high, according to Black Knight’s latest Mortgage Monitor report.

Tappable equity, the amount available for a homeowner to borrow against before reaching a maximum 80% loan to value, increased to an all-time high of $5.5 trillion in the third quarter of 2017. This is up a significant $3 trillion from the market’s bottom in 2012.

In fact, currently, more than 80% of all mortgage holders now have available equity to tap via cash-out refinances or HELOCs.

Rising home prices have not only decreased tappable equity, but also continued to decrease the number of underwater borrowers. In the third quarter last year, just 2.7% of all borrowers, or about 1.36 million, now owe more on their mortgage than what their home is worth.

This is a decrease in negative equity borrowers of a full 37%, or 800,000 borrowers, from the start of 2017.

But even as homeowner equity continues to grow, cash-out refinances decreased 14% from the third quarter 2016 to the third quarter 2017 due to rising interest rates. Those who did draw equity via cash-out refinances in the third quarter withdrew an average $68,000 in equity, down slightly from $69,000 the previous quarter.

Black Knight explained that if borrowers wish to capitalize on their home equity, often HELOCs are better options than cash-out refinances.

“We’ve noted in the past that as interest rates rise from historic lows, HELOCs represented an increasingly attractive option for these homeowners to access their available equity without relinquishing interest rates below today’s prevailing rate on their first-lien mortgages,” said Ben Graboske, Black Knight Data & Analytics vice president.

“However, with the recently passed tax reform package, interest on these lines of credit will no longer be deductible, which increases the post-tax expense of HELOCs for those who itemize,” Graboske said. “While there are obviously multiple factors to consider when identifying which method of equity extraction makes more financial sense for a given borrower, in many cases, for those with high unpaid principal balances who are taking out lower line amounts, the math still favors HELOCs.”

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