Withdrawing Home Equity: Differences Across Race and Ethnicity

Extracting home equity has become increasingly popular in the last decade, especially among subprime borrowers. Using the American Housing Survey, this paper examines the differences in the propensity to extract home equity across non-Hispanic black, Hispanic and non-Hispanic white homeowners in the United States. It focuses on two popular types of methods to extract home equity—cash-out refinance and home equity lines of credit. Controlling for housing and socio-economic characteristics, the study finds differences in the extensive margin in withdrawing equity, but not in the intensive margin. That is, while Non-Hispanic black homeowners are less likely to extract home equity in general than non-Hispanic whites there is no difference in the amount of equity withdrawn. However, much of this difference is driven by their lower propensity to withdraw equity using a home equity line of credit; non-Hispanic black and Hispanic homeowners are just as likely to withdraw equity using a cash-out refinance than non-Hispanic white homeowners.