The past few years in the housing industry have been nothing short of phenomenal. In 2020 and 2021, many homeowners refinanced, locking into historically low 30-year fixed-rate mortgages.
Thank you for reading this post, don't forget to subscribe!And now, with the effects of inflation and growing economic uncertainty, home equity lines of credit (HELOCs) are an increasingly popular option for those looking to tap into the growing equity of their home while protecting their existing, low mortgage rates. are considering.
HELOCs continue to set the stage as flexible, helpful products that provide quick access to financing for a range of uses, including home renovations, debt consolidation or emergency purchases.
Extended renewal calls for extended financing
As rising mortgage rates combined with historically high home prices continue to dampen enthusiasm for those looking to buy, many homeowners are thinking outside the box, even amid current labor and supply. , looking for ways to improve your current homes and add value to your current homes. lack of series.
TD BankA HELOC Trend Watch survey found that 43% of homeowners who are planning a renovation intend to use a HELOC or home equity loan to finance the project. Additionally, 65% of the total respondents are currently planning or planning to renovate their homes within the next two years.
As labor and supply chain shortages also stretch projects’ timelines and budgets, homeowners are favoring flexible financing options. HELOCs allow homeowners to draw funds from their line of credit when needed and generally offer lower rates than other fixed loan mortgage products and many unsecured consumer loan options. Hence, they stand out as offerings that can provide consumers with flexibility and convenience while completing home projects where costs can fluctuate.
Of those planning to renovate, the TD Bank survey also found that 78% plan to move forward with their renovations, despite potentially longer wait times due to labor and supply chain shortages.
The road ahead for homeowners in 2023
One Urban Institute Housing Finance Policy Center The report found that in the first five months of 2022, nearly $101 billion in HELOC funds and $38 billion in closed-end home-equity loans originated in the US. federal Reserve With more rate hikes being planned in 2023 to combat inflation – albeit at a slower pace – and first mortgage rates remaining high, home equity originations will continue to gain popularity.
Homeowners have an opportunity to better navigate and secure their financial goals in this market, and to do so, HELOCs and home equity loans should be top of mind as viable financing options.
There is risk involved because HELOCs are tied to the prime rate and may continue to rise. Also, everyone’s financial risk appetite and financial situation is different. Therefore, talking with a lender is imperative. They can advise borrowers on how they can customize these products to fit their unique personal financial situations.
Whether homeowners are considering renovations, consolidating debt, or paying for education costs, lenders can help borrowers understand how HELOCs and home equity loans can help them meet financial goals and How can we enhance our ability to meet their financing needs?
Steve Kaminski is head of US residential lending at TD Bank.
