HELOC Usage Is Rising

Use HELOC Wisely

Generally, for a lot of homeowners, a significant portion of their funds are tied up in their house. But a vast number are no longer ok with sitting on that nest egg and watching it develop. They want cash and they’re tapping their home equity to get it. HELOC stands for Home Equity Line Of Credit, and is a loan that draws from the equity invested in your home.

In the first quarter of 2018, the number of people taking out HELOCs jumped 18% from the previous quarter, and 14% from the same time last year, according to a recent report from property analytics firm ATTOM Data Solutions.

In just three months, almost 350,000 borrowers took out HELOCs. The cities with the most impressive upticks in HELOC volume were Hartford, Connecticut (up 80%), Nashville, Tennessee (up 74%) and Las Vegas (up 69%, somewhat unsurprisingly).

At $67 billion, the current HELOC amounts volume pales in comparison to its 2006 hey-day of $140 billion. But some, including Freddie Mac, say they expect it to continue its steady climb thanks to rising interest rates and home prices. In its 2018 forecast report, Freddie Mac said borrowers tapping their home equity will be a major trend driving the market forward this year.

In a report released last year by TransUnion made similar claims, with estimations that 10 million consumers will take HELOCs between 2018 and 2022, which would be more than double the number of HELOCs originated from 2012-2016.

In spite these predictions, some are concerned that federal tax laws instituted last year would dampen HELOC activity.

The Tax Cuts and Jobs Act mandated that homeowners who withdrew equity and did not use it to renovate, build or purchase a home were no longer able to deduct the mortgage interest from their taxes, in effect making these loans more expensive for some borrowers.

But it seems homeowners want that equity, and they won’t be deterred. A survey from TD Bank revealed that most HELOC borrowers want the cash to renovate, while accessing emergency funds and paying for education came in second and third, respectively.

With home price confidence staying strong, it seems many feel comfortable accessing their hard-earned equity to fund their needs now.

*This article does not represent legal interpretation or advice. This is not a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet LTV requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines, and are subject to change without notice based on applicant’s eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over life of loan. Reduction in payments may reflect longer loan term. Terms of the loan may be subject to payment of points and fees by the applicant. Seattle Mortgage Brokers, LLC NMLS: LO# 305371 MB# 761615