Key facts
- Homeowners held $34.9 trillion in residential real estate equity in Q1 2026, with $11 trillion estimated as tappable.
- Nonbank lenders' share of HELOC originations increased from 8% in 2022 to 29% in 2025.
- Banks originated 45.6% of HELOC units in 2025, credit unions 35.5%, and nonbanks 13.4%.
- Nonbank HELOCs had an average origination time of 15 days and cost less than $1,000, compared to 40 days and $1,000-$2,500 for depository HELOCs.
- Nonbank HELOCs had a 93% utilization rate compared to 36% for depository HELOCs.
- Borrowers with credit scores of 760+ represented 66% of bank HELOC units, versus 37% for nonbanks.
Nonbank lenders are increasingly capturing market share in the home equity lending sector, driven by record levels of tappable homeowner equity and more efficient operations compared to traditional banks and credit unions. Homeowners held an estimated $34.9 trillion in residential real estate equity in the first quarter of 2026, with approximately $11 trillion of that considered tappable.
Subordinate-lien originations, which include home equity lines of credit (HELOCs) and closed-end second mortgages, rose 21% from 2024 to 2025, reaching $179.3 billion. However, the growth has not been evenly distributed. Banks and credit unions, which originated 85% of these loans in 2022, saw their combined share fall to 66% by 2025. Conversely, nonbank lenders increased their share from 8% to 29% over the same period.
The shift is particularly evident in the HELOC segment, where nonbank originations surged by approximately 140% between 2023 and 2025. This contrasts with more modest growth of 20% at regional banks, 8% at credit unions, and 7% at large banks. Despite this growth, banks still held a significant portion of HELOC origination units in 2025 at 45.6%, followed by credit unions at 35.5% and nonbanks at 13.4%.
When closed-end second mortgages are included, nonbanks commanded 52.8% of units in 2025, with this product type growing its share of all subordinate-lien originations from 25.4% in 2022 to 40.4% in 2025.
The report attributes the nonbank advantage primarily to the cost and speed of their lending operations. Data indicates that while 49% of HELOC applications reached closing in 2024 with an average turn time of 39 days and costs around $4,600, nonbank lenders typically complete the process in about 15 days with costs under $1,000. Furthermore, nonbank HELOCs show significantly higher utilization rates (93%) compared to depository HELOCs (36%), meaning borrowers draw more of their approved credit lines.
While banks tend to offer larger credit lines, nonbanks often originate smaller commitments with higher outstanding balances. The growth in nonbank lending does not appear to stem from substantially weaker credit standards. Banks have a higher concentration of borrowers with credit scores of 760 or above (66% of units), compared to nonbanks (37%). Nonbank borrowers generally maintain prime credit, with very few below a 670 score, and typically have lower debt-to-income ratios and combined loan-to-value ratios than bank and credit union borrowers.
However, nonbank HELOCs do carry higher interest rates, averaging 8.14% in Q2 2026 for borrowers with strong credit profiles, compared to 7.65% for banks and 7.36% for credit unions.
Shifting borrower needs, with debt consolidation rising as a primary purpose for home equity volume, alongside the mortgage rate lock-in effect, are supporting demand. The report suggests banks can improve by enhancing in-house operations, partnering with fintechs, or selectively selling or securitizing loans to capitalize on growing secondary market demand.