More Charlotte homeowners are ‘equity rich.’ What to know before cashing in.

With home values rising in recent months in Charlotte and beyond, an increasing number of homeowners are seeing a surge in their home equity.

Even as the real estate market shows some signs of cooling, more than half of Charlotte-area homeowners with mortgages are now considered “equity rich,” one study found.

In addition to increasing your profits if and when you sell your home, there are also ways to utilize the equity in your home without selling when you need cash flow.

Here’s what to know about home equity, the current situation for Charlotte homeowners and how to get equity out of you home:

What is home equity?

Home equity is the financial value of your home to you.

It’s calculated, the personal finance education program Investopedia explains, by determining your property’s “current market value” and subtracting “any liens that are attached to that property,” such as a mortgage.

How much equity you have in your home is fluid, because the market value of your property can go up and down over time and the amount of your mortgage will decrease as you make payments towards it.

Are Charlotte homeowners getting ‘equity rich’?

With home values surging across much of the country in recent months, including in Charlotte, experts say more homeowners are becoming “equity rich”: a phenomenon where homeowners have at least 50% equity in their home.

One study — put together by the real estate research firm Attom — found that as many as 48.1% “of mortgaged residential properties in the United States were considered equity-rich in the second quarter” of 2022. That’s up, Attom noted, from 44.9% in the first quarter of 2022 and 34.4% in the second quarter of 2021

The numbers looked even better for homeowners in Charlotte.

Attom estimates that of the 484,356 properties with “outstanding mortgages” in the Charlotte metro area, 60.1% were equity rich as of the second quarter of 2022. That’s up from 56.3% in the first quarter of the year and compared to 1.8% of mortgaged properties that Attom estimates are “seriously underwater.”

Statewide, Attom puts the percentage of North Carolina’s 1,826,272 outstanding mortgages that are equity rich at 53.3% for the second quarter of 2022. That’s compared to 2.5% of mortgages that Attom classifies as “seriously underwater.”

That lines up with much of what’s been seen around the region.

Of the top 10 states where the share of equity-rich homes increased most from the first quarter of 2022 to the second quarter, according to Attom, seven were in the South region. South Carolina was among them, with the share of equity-rich homes rising from 41.2% to 46.5%.

And an investigation earlier in the year from WRAL TechWire found that about 56% of homeowners in the Triangle region were now equity rich.

How to get equity out of your home

When you sell your home, having more equity in your home means more of a profit.

But there are also ways to utilize equity without selling your property.

A home equity loan, also known as a “second mortgage,” “allows you to borrow a lump sum against your current home equity for a fixed rate over a fixed period,” Investopedia explains.

You may also be able to use your equity “to get a new mortgage that’s larger than the amount owed on your existing mortgage,” a process often referred to as a “cash-out refinance.” You can then use the funds to pay off your original mortgage and to cover other expenses.

Refinancing does mean you’ll likely be subject to today’s interest rates, which are on the rise.

Another option is a home equity line of credit, also known as a “HELOC,” which is “a revolving line of credit based on your home’s equity.”

“Often there is a 10-year draw period, where you can access your credit as needed, with interest-only payments,” Investopedia explains. “After the draw period, you enter the repayment period, where you must repay all the money you borrowed, plus interest.”