Americans Are Sitting on Record Home Equity, So Why Are They Drowning in Credit Card Debt?

Two interesting trends are happening at the same time: homeowners today have a high amount of equity in their homes, and credit card customers have a growing amount of credit card debt. So why not pay down high-interest credit card debt with some of a home’s equity? Let’s start by looking at the numbers.

Despite a year-over-year decline, the average U.S. mortgage borrower still had about $295,000 in accumulated home equity in Q4 2025, according to Cotality.

“Existing mortgage borrowers still control nearly $17 trillion in total equity, with roughly $11 trillion that could be tapped, and those figures have held remarkably steady over the past year,” said Selma Hepp, Chief Economist at Cotality. 

“And while borrowers have been relatively timid in tapping the equity, declining borrowing rates could make tapping home equity relatively more affordable in the future.”

Credit Card Debt Is on the Rise

Consumers carried an average of 3.7 active credit cards in 2025, according to Experian. 

Plenty of Americans are carrying debt on their credit cards. In the fourth quarter of 2025, credit card balances rose by $44 billion from the previous quarter reaching $1.28 trillion, according to the Federal Reserve Bank of New York. 

According to Achieve, 55% of consumers carry credit card balances to cover their essential expenses, including 26% of consumers who carried a balance for six months or longer. So there are quite a few American consumers grappling with credit card debt.

Why People Don’t Tap Home Equity to Pay Credit Card Debt

Nick Alphs, President of Mortgage Lending with Academy Bank, recently explained how homeowners today are sitting on a record amount of home equity.

“The equity comes from the inventory shortage, so pushing prices up. And the inventory shortage comes from people having really low interest rates,” Alphs said.

It’s a perfect storm, Alphs added, with a lot of equity being created due to the shortage in inventory, and people unwilling to consider refinancing because they have “an insanely low mortgage rate.”

Some consumers with equity in their homes also have a pile of credit card debt.

“So we’re in a unique time in America where people are trying to figure out or navigate what to do with their high interest credit card debt, how to best leverage their home, whether it be through a HELOC or a refi cash out,” Alphs told us. 

Ways to Tap Home Equity

Consumers with credit card debt and plenty of equity in their homes have a choice between a home equity line of credit (HELOC) or a refi cash out, also called a cash-out refinancing, to pay off their credit card debt.

“A HELOC functions a lot like a credit card, meaning it’s a revolving debt. Oftentimes the repayability period happens later down the road. So you’re kind of transferring revolving debt to revolving debt at a better rate,” Alphs told us.

With cash-out refinancing, a borrower refinances their mortgage for more than the amount owed and receives the difference in cash. Cash-out refinances are often structured as fixed-rate mortgage loans, though terms can vary by lender and borrower.

“They know what they’re paying down every month versus just covering the interest. And as long as they have a good solid plan going forward, it’s a great tool to use,” Alphs told us.”

Improved Credit Scores for Cash-Out Borrowers

One potential benefit, according to Consumer Financial Protection Bureau research, is that cash-out borrowers saw sharp initial credit-score improvements after refinancing, though those gains later weakened.

So it is important to continue to pay off credit cards and other debts after refinancing and to make cash-out refinancing payments as agreed.

The Bottom Line

Americans have equity in their homes and this could be a way of paying off high-interest credit card debt. For example, the average U.S. mortgage borrower had about $295,000 worth of equity in their home in the fourth quarter of 2025. And 55% of American consumers carry credit card balances to pay for essential expenses.

When choosing to tap a home’s equity, consumers have the choice between a HELOC or cash-out refinancing. Many Americans are resisting these options because they don’t want to lose the very low interest rate they have on their mortgage.

And because home equity borrowing is secured by the home, consumers should understand that using it to pay credit card debt can put their home at risk if they cannot keep up with their payments.