Home Equity Lending 2025: Big Takeaways from FirstClose and MBA

If there’s one thing the mortgage industry has learned in the last few years, it’s that homeowners aren’t letting go of their low-rate mortgages anytime soon. That’s why, on September 10, FirstClose teamed up with the Mortgage Bankers Association (MBA) for a webinar all about the next big opportunity: home equity lending.

Why home equity is having a moment

Homeowners are sitting on a record amount of wealth. According to the Federal
Reserve, household real estate equity reached nearly $35 trillion in 2025. That surge
comes after over a decade of home price appreciation, including almost 45% growth
nationally between 2020 and 2023. Put simply, values are up, equity is up, and borrowers have plenty to tap into.

At the same time, other types of consumer debt are piling up. The New York Fed reports that Americans are carrying about $5 trillion in non-housing debt, much of it from credit cards and auto loans with double-digit rates. In an era of rising home equity, homeowners would typically look to a cash-out refinance as means to clear or pay down their more expensive debt.

But here’s the twist: with mortgage rates still in the 6–7% range, refinancing is no longer
as attractive to the millions of homeowners locked in pandemic-era rates below 4%.
Instead of giving up that ultra-low first mortgage, they’re turning to HELOCs and closed-
end seconds to access cash while keeping monthly costs manageable.

$35 trillion

The good, the bad, and the frustrating

The MBA study shows that borrowers use these loans for two main reasons: home improvements and debt consolidation. Renovations are still the top use case, but consolidating high-interest debt has quickly climbed into second place.

Here’s the catch: getting these loans across the finish line isn’t easy. Pull-through rates are under 50 percent, which means more than half of applications never close. And when they do, it takes a while. Average cycle times are over 30 days. Compare that to a personal loan that funds in a few days, or a credit card that’s instantly available, and you can see the challenge. On top of that, costs are climbing. In 2024, lenders spent an average of $4,600 to originate a single home equity loan.

Reasons to be optimistic

It’s not all doom and gloom. Lenders are getting creative about solving these pain points. Nearly half of valuations are now done using automated valuation models (AVMs), often paired with quick inspections, which speeds things up. Digital borrower portals, self-service tools, and AI-driven verifications are starting to make their way into the process, too.

And the outlook? Pretty solid. MBA participants expect HELOC balances to grow nearly 10 percent over the next two years. There’s also a potential boost from the secondary market. Freddie Mac has dipped a toe in the water with a pilot program to purchase closed-end seconds, hinting at more distribution options for lenders.

What this means for lenders

The webinar’s takeaway was clear: home equity isn’t just a side hustle anymore. It’s the main event. To win, lenders need to focus on education (because every borrower has a different reason for tapping equity), speed (because no one wants to wait 40 days for funds), and trust (because big financial decisions need a confident guide).

At FirstClose, we see home equity as the growth story for 2025. Lenders can meet rising demand without overhauling their entire tech stack by making the process easier, faster, and more transparent. And that’s good news for borrowers, lenders, and the industry as a whole.

You can access the webinar from here to learn even more insights