How to Safely Cash In on Your Home Equity Windfall

You may not feel it yet, but if you're an American homeowner you're probably a good bit richer after the dizzying run-up in housing prices last year. But how do you tap into your newfound wealth? And should you?

U.S. homeowners gained an average $55,300 in their home’s value (minus their mortgage) in 2021. In some especially hot cities, such as Denver and Miami, the increase was close to $80,000, while in high-price Los Angeles and San Francisco, it was more than $110,000.

That's a remarkable jump considering it’s taken three to four years to see gains of $50,000 in prior rising markets, said Frank Nothaft, chief economist at real estate analytics firm CoreLogic.

For anyone wanting to sell, it’s a windfall — just find a buyer and turn that appreciation into cold hard cash. But what if you're happy staying put? With all the current market volatility, inflation and other economic uncertainty, it’s only natural to want to tap those gains now, perhaps by borrowing against your newly increased equity (the difference between your home’s current value and what you owe on your mortgage.)

Is it safe, though, to use your home as an ATM, especially as fears of a recession loom? It actually can be a smart play, if you use the money wisely and pick the right loan product.