Homeowners Reluctant To Tap Equity
Even though the housing crisis ended a decade ago, most homeowners are reluctant to take out home equity lines of credit (HELOCs), according to a recent survey.
The survey also found that one in five homeowners are unfamiliar with these types of loans and 30 percent do not know how to apply for one.
Sixty-five percent of respondents said they had never taken out a HELOC loan, and 78 percent indicated they were familiar the concept of a HELOC. Just more than half of respondents indicated they have more than $100,000 in equity in their home.
Asked if they knew what a HELOC loan is, one in five (21 percent) said they did not, while nearly one third (30 percent) said they did not know how to open one.
For those who had thought about opening a HELOC, home improvement projects were the most popular way that respondents said they would use the funds. Paying for a medical emergency was the second most common expense at 48 percent. Nearly a third stated they would use the funds to pay off another debt (32 percent), while credit-card consolidation was cited by 18 percent of respondents.
Eighteen percent cited unemployment as a circumstance that might drive them to use home equity to meet expenses, while 15 percent said they might leverage the funds to purchase another home.
When it comes to borrowing for financial needs like tuition, medical expenses or debt consolidation, 22 percent of respondents said they would consider a HELOC.
"Homeowners are using debt for responsible reasons, like affordable improvements that increase the value of their homes," says Jeff Taylor, managing director of Digital Risk. "Remodeling is at an all-time high and it's much more efficient to fund that activity with a four percent HELOC than a credit card charging 17 percent interest."
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