American homeowners are flush with equity, but soaring mortgage rates have changed the way they tap that pile of wealth.

In short: Cash-out refinancing is out, and home equity lines of credit (HELOCs) are in.

As of mid-2023, American homeowners were sitting on nearly $32 trillion in home equity, according to the Federal Reserve Bank of St. Louis.

Fully 47% of mortgaged homes were categorized as “equity-rich” in the third quarter, meaning that the mortgage balance totals no more than half of the home’s estimated market value, real estate data firm ATTOM reports.

Intriguingly, the share of equity-rich homes declined slightly from 49% in the second quarter. While the reasons for the decline are unclear, home price appreciation has cooled somewhat, and many homeowners have already tapped their equity for renovations and other expenses.

With equity comes opportunity — but with interest rates on the rise, HELOCs have become the better option for many homeowners. These lines of credit come with variable interest rates, which change based on the prime rate, in turn tied to Federal Reserve policy.

The average HELOC rate was 9.09% as of Nov. 1, according to Bankrate’s weekly survey of lenders, up from 9.02% the previous week.

While that sounds high, it’s simply an average. The more aggressive home equity lenders win business by dangling generous deals, including lower introductory rates.

In one example, Connexus Credit Union markets an introductory rate of just 5.99%, three full points below the national average. That HELOC rate stays in place until Oct. 1, when the rate jumps to 8.74%.

Likewise, Central Pacific Bank, which serves customers in Hawaii, offers a HELOC introductory rate of 7.85% for two years, plus an offer to pay up to $500 in early termination fees if you already have a HELOC with another lender.

Even at 9%, HELOCs are still attractively priced compared to unsecured personal loans. If you’re looking to finance a renovation and have equity to tap, a line of credit could be less expensive than a home improvement loan.

A HELOC also spares you from doing a cash-out refinance, which involves replacing your existing mortgage with a whole new loan at today’s rates.