A sharp recovery in home prices over the past few years has given homeowners considerably more equity to tap, about $825 billion collectively, according to Black Knight Financial Services. This is nearly 2 1/2 times the home equity that existed just four years ago, but tapping that equity, in the form of a home equity line of credit (HELOC), is far more difficult than it was in the last decade, when a home was synonymous with an ATM.
"There is no question that HELOCs being originated today are of exceptional credit quality," said Ben Graboske, senior vice president at Black Knight Data & Analytics. "In fact, HELOC originations in Q1 2015 had the highest-weighted average credit score on record."
Home equity line lending has jumped 40 percent from just a year ago, but is still 85 percent below where it was in 2007, at the height of the housing boom. These new borrowers had an average FICO credit score of 782, which is considered extremely low risk. These borrowers are also tapping their home equity for far different reasons than they did a decade ago.