Treat Yo’ Self — Dallas Tops State For Tappable Equity

equityOne of the pieces of good news about rising home values in Dallas is that homeowners could cash out as much as $132 billion (yes, with a “B”) in equity, analysis from lending marketplace Credible.com revealed.

The company’s analysts found that Dallas ranks first in Texas and 10th in the nation for total tappable equity — more than real estate hot spots like Miami, Denver, or Phoenix, thanks to median home values that are up 67 percent from their lowest point in 2012.

For comparison’s sake, Houston clocked in at $96 billion, Austin at $48 billion, and San Antonio was $24 billion.

What is “tappable equity?” Basically, it’s the amount of cash you can pull out of your home while keeping at least a 20 percent ownership stake in the home. Equity, in its simplest terms, is the difference of what your home is valued at compared to what you owe.

In Dallas, the average is something just north of $90,000, Credible said.

Earlier this month, Attom Data Solutions revealed that equity-rich mortgaged properties in the U.S. have increased to 14.5 million. In Texas, about 28 percent of all mortgage are in that equity-rich sweet spot. About 5 percent are seriously underwater.

But Credible.com editor Matt Carter warned that while cashing out home equity can be a great way to pay for home improvements or pay off debt, it pays to shop around.

“Even a quarter-point interest rate reduction on a typical $250,000 30-year mortgage refinance could save a Dallas-area homeowner more than $12,000 over the life of the loan,” he said.

Earlier this year, Jon Anderson reviewed the home equity options (and what you should consider before cashing out), explaining that it pays to consider whether a Home Equity Line of Credit, a second mortgage or home equity loan, or cash-out refinancing.

CNBC also warned that income taxes should also be a consideration. “Under the new tax law, the home equity interest is only tax-deductible if you’re using the money for home renovations on the property tied to the loan,” Beth Braverman wrote. “The total amount of home equity debt (including your mortgage) that qualifies for the deduction can’t total more than $750,000.”

And of course, cashing out does come with a little risk, too. “Cashing out too much equity can put homeowners at greater risk of foreclosure in a downturn,” Carter said.