Homeowners Using HELOCs to Cut Housing Costs

  • Source: dsnews.com

Treliant Takeaway:

Treliant’s Regulatory Compliance and Risk Management (RCRM) professionals know mortgage, residential and commercial, originations and servicing, closed-end and open-end. If you are thinking about offering any new products, including home equity loans or lines of credit, you need to ensure that you have processes, documentation, and systems to support the new products for operational efficiency and regulatory compliance. Treliant can help.

Article Highlights:

“A recent survey from TD Bank found that nearly 90% of respondents indicated an increase in equity since purchasing their home, but far fewer are planning to tap into this potential source of funds within the next 18 months. Meanwhile, almost 50% of homeowners know how much equity they have in their home compared to 32% in 2019.”

On October 14, 2022, DSNews explored the benefits of tapping into home equity. “Many Americans have more equity in their homes than ever before, so utilizing it to their advantage may make financial sense,” said Jon Giles, Head of Consumer Direct Lending at TD Bank. “When used responsibly, HELOCs and home equity loans are effective, affordable tools which can assist in paying down higher interest debt, covering education costs or allowing for home renovations, which add value to the property.”

Some interesting statistic cited by DSNews include:

  • During the summer with inflation reaching a 40 year high, “70% of respondents still consider themselves very or somewhat financially stable.” 52% said they were not likely to consider apply in the next 18 months.
  • 65% with debt other than mortgage said they would consider consolidating debt at a lower interest rate. “47% viewing this as the most important trait of their debt consolidation tactic.” “a third (33%) of those who have debt other than their mortgage and are interested in consolidating it at a lower interest rate, feel neutral or uncomfortable doing so using their home as a collateral.” 43% would prefer a personal loan.
  • 69% of those who had debt other than mortgage had credit card debt, 43% car loans, 32% personal loans, 27% student loans, and 1 in 5 had medical debt.
  • 43% of those planning to obtain a Home Equity Line of Credit (HELOC) were going to use the funds to renovate their homes.

“Consumers should always consider their unique financial situation and speak with a lender first when exploring options to utilize home equity,” said Steve Kaminski, Head of Residential Lending at TD Bank. “Lenders can help borrowers understand what products align with their financial goals, their current equity level and how they plan on using the money. They’ll also help make sense of the current market so you can understand what your payments will look like and how they can change based on today’s interest rate environment.”

“As homeowners look for flexible lending options to power their renovation projects, home equity loans and HELOCs are great options to consider,” said Kaminski. “HELOCs, in particular, lend themselves to flexibility with borrower’s ability to draw funds as needed. With supply chain disruptions and rising inflation continuing to impact the total cost of home renovations, flexibility will be key in accessing funds throughout the process.”