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  • 1.4 million homeowners in the metro Dallas market have $132 billion in equity they can tap at affordable rates for home improvement projects or to pay off costlier debt
  • Home values in the market are up 67% since 2012, bringing average “tappable equity” per home to $93,000
  • Cashing out home equity without comparing actual mortgage interest rates could cost homeowners $12,000 or more in unnecessary interest charges

Rising home values mean more than 1.4 million Dallas-area residents can tap the equity they’ve built in their homes to finance home improvement projects at affordable interest rates, or pay off high-interest credit card or student loan debt.

With home values up 67% from their 2012 bottom, these homeowners now have an average of $93,000 in “tappable equity” — the amount of cash they can pull out of their homes while still retaining an ownership stake of at least 20%.

Even though interest rates are on the rise, mortgage rates remain low by historical standards. That means a growing number of homeowners are taking advantage of rising home prices, and tapping their equity through a cash-out mortgage refinance.

But according to research by Freddie Mac, most borrowers take out a mortgage without getting actual rates from multiple lenders, which puts them at risk of paying lenders thousands of dollars in unnecessary interest charges.

Even a quarter point interest rate reduction on a typical $250,000 30-year loan saves homeowners over $12,000 over the life of the loan.

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How Dallas stacks up to other markets

There’s more total tappable equity in the metro Dallas area than any other market in Texas, including Houston ($96 billion), Austin ($48 billion), and San Antonio ($24 billion).

Looking at the top 50 U.S. markets for tappable equity, Dallas ranks 10th in the nation, ahead of markets like Miami, Denver and Phoenix (see story, “What Americans Should Know Before Cashing out $6 Trillion in Home Equity”). That’s largely due to the recent surge in home values.

While runaway price appreciation on the coasts has driven the median home values in some markets above $1 million, homes in the greater Dallas market remain relatively affordable.

Since hitting a low of $137,800 during the housing downturn, Zillow estimates the median home value in the metro Dallas area has climbed 67%, to $229,400. That’s an average gain of $91,600 per home, boosting tappable equity to $93,000, according to a separate analysis by mortgage data aggregator Black Knight.

The metro Dallas market — a 9,279-square-mile area with a population of 7.4 million that also includes Fort Worth and Arlington — remains affordable. But Dallas also has its share of pricier submarkets.

The 10 priciest housing markets in the metro Dallas area

  1. Westlake ($1,609,400 median home value)
  2. Highland Park ($1,397,600)
  3. University Park ($1,203,100)
  4. Southlake ($653,900)
  5. Parker ($555,000)
  6. Lucas ($541,100)
  7. Colleyville ($501,300)
  8. Pecan Acres ($483,800)
  9. Double Oak ($482,200)
  10. Bartonville ($479,800)

Estimated median home values as of Sept. 30, 2018. Source: Zillow Home Value Index.

The strong job market has helped spur demand for homes in Dallas and the surrounding region. After peaking at 8.5% in 2009, the unemployment rate has been falling steadily ever since, dropping to 3.3% in August.

During the downturn, Dallas home values weren’t hit as hard as many other parts of the country. But home values started posting strong gains in 2013.

Tapping equity responsibly

Of course, falling unemployment and rising home prices doesn’t mean that homeowners are immune to ups and downs in the economy. Pulling too much cash out of a home — or putting too little down when purchasing it — can put homeowners at higher risk of foreclosure in a downturn.

But homeowners who keep at least a 20% stake in their homes when refinancing have enough of an “equity cushion” that lenders typically won’t require them to obtain private mortgage insurance.

Undertaken responsibly, a cash-out refinancing can provide homeowners with an affordable source of funding for home improvement projects or other big-ticket expenses like college or unexpected medical bills. Many homeowners are also tapping equity in their home to get rid of high-interest credit card or student loan debt.

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Last year, Americans tapped $92.1 billion in home equity — either through cash-out mortgage refinancing ($69.7 billion), or refinancing that paid off a second mortgage or home equity line of credit ($22.4 billion). That’s more than double the $42.5 billion in equity tapped through 2012 mortgage refinancings.

How to compare mortgage rates

For homeowners who are thinking about cashing out some of their equity by refinancing, it pays to compare mortgage rates.

Until recently, it’s been quite a chore to do that online. Today, there are three main avenues for exploring mortgage rates online:

  • Single-lender websites
  • Traditional rate comparison sites
  • Modern mortgage marketplace

Some single-lender websites that facilitate “quickie mortgages” have reduced the hassle of applying for a loan. But they don’t provide information on rates available from other lenders, and may even discourage consumers from shopping for a mortgage.

The main goal of many traditional rate comparison sites is to convert consumers into “leads” and sell them to lenders. Since the rates they generate are often based on self-reported credit scores and little or no underwriting is performed, they can be misleading.

Credible.com is a modern mortgage marketplace that’s integrated with credit bureaus and lenders, so consumers can request actual rates from top mortgage lenders. Using Credible, consumers can:

  • Compare actual rates in 3 minutes (not ranges or estimates)
  • Shop and close “on platform,” like booking an airline ticket or buying essentials on Amazon
  • Save time and avoid frustration with streamlined, digital origination process
  • Consult with Credible’s licensed loan officers if needed

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While strong home equity growth presents an opportunity for many homeowners to meet financial goals like paying down costlier debt or improving their homes, they should make sure they’re not overpaying when they refinance their mortgages.