High Household Costs Have Homeowners Tapping Into Home Equity - Here Are Better Cost Alternatives

Homeowners should know it’s not always possible to tap into home equity.

Published: 6/15/2026, 9:56:29 AM EDT

High Household Costs Have Homeowners Tapping Into Home Equity - Here Are Better Cost Alternatives — Confiscation of property leading to arrest by police. Debtor speaking with bailiff about debt collection and home seizure. (Andrey_Popov/Shutterstock)

U.S. homeowners are taking more cash out of their properties through home equity loans and lines of credit, which are at their highest levels since 2021. While tapping into home equity can generate immediate cash, it can also trigger long-term debt that may not be easy to repay.

Even more alarming is that the rise in home equity payouts was driven in part by second-lien lending like home equity loans or home equity lines of credit, which reached their strongest first-quarter volume in nearly two decades as more borrowers chose to preserve their existing low-rate first mortgages, according to the June 2026 ICE Mortgage Monitor report. Second-lien lending refers to a secured loan that’s repaid only after the primary, or "first-lien," debt is paid in full in the event of default or bankruptcy. As second-lien home loans carry a higher risk of loss for the lender, they usually come with significantly higher interest rates.

“More than half (54%) of all equity extraction came through second liens as borrowers continued to preserve historically low first-mortgage rates,” the study noted. “Cash-out refinance withdrawals reached their highest first-quarter level since 2022, while second-lien withdrawals posted their strongest first-quarter performance in nearly two decades.”

Better Cash-Generating Strategies for Homeowners

Personal finance specialists say it’s usually not a good idea to tap home equity loans to cover large bills or expenses. “Homeowners often convert unsecured debt into debt secured against their home,” Lawrence Hugo, director at Credit Mediation Service, told NTD News. “While this may provide short-term relief, it can significantly increase the total cost of repayment and place the family home at risk if circumstances worsen.”

There are some scenarios where home equity loan vehicles make sense. “Using home equity to pay bills or large expenses can be a good idea when it is used for the right purpose such as paying off high-interest credit card debt to lower the interest rate and create a more manageable payment,” Steven Parangi, licensed mortgage loan originator at Alpine Mortgage Services, LLC., told NTD. “It may also make sense for necessary home repairs or renovations that can improve the value of the property.”

Yet using home equity to pay ordinary monthly bills may be a bigger concern. “If the budget does not work before the home equity loan, then adding another monthly payment may only delay the problem,” Parangi said. “The biggest risk is that the homeowner is turning unsecured debt into debt secured by the house. If someone is behind on their credit card payments, it hurts their credit, but if they fall behind on their home equity loan/HELOC, they are at risk of losing their home.”

Looking to cash-generating alternatives can mitigate those risks. These strategies may be particularly effective.

Revamp your household budget

Before tapping home equity, homeowners should first look at their budget.

“Too many people focus on finding money to pay for expenses instead of figuring out why the money is needed in the first place,” Michael Lush, founder of Replace Your Mortgage, told NTD. “If the issue is temporary, there may be other options worth considering.” Those options include hardship programs, payment plans, loan modifications, balance transfers, debt management plans, negotiating with creditors, or even temporarily reducing discretionary spending. “All of those options may solve the problem without putting the house on the line,” Lush noted.

Get creative when reaching out to lenders and creditors

Even where debts have been sold to collection agencies, outcomes such as permanent interest freezes, reduced repayments, discounted settlements and, in some cases, debt waivers may be available.

“The biggest mistake homeowners with debt make is assuming that paying out debt solves the problem,” Hugo noted. “Often, the debt is simply moved into a mortgage where it may cost substantially more over time. Many people also fail to investigate hardship and negotiation options before using their home's equity.”

Proceed with caution

Homeowners should know it’s not always possible to tap into home equity.

“Banks can reduce credit limits, freeze HELOCs, tighten lending standards, or change underwriting requirements,” Lush said. “You never know if you will qualify for a new HELOC or equity loan in the future; job loss, credit changes, increased debt, income changes, and decreases in home values can change whether you qualify. Too many people build financial plans around access to credit instead of building plans around income, savings, and a sustainable budget.”

Home equity often represents years of mortgage payments, appreciation, and financial progress. “Once that equity is gone, rebuilding it can take a very long time,” Lush added. “Tapping into their equity should be done strategically and carefully.”

The views and opinions expressed are those of the interviewees. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. NTD does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. NTD holds no liability for the accuracy or timeliness of the information provided.