Whether they’re considering taking out a home equity line of credit (HELOC) or already in the process, nearly half of homeowners say interest rates are the most influential factor to consider. TD Bank surveyed around 1,350 homeowners for its 2017 Home Equity Sentiment Index, and found that interest rates outweigh other factors when considering a HELOC, compared to fees, loan amount, draw period length, and trust in their lender.
The question now is how will the Fed rate hike affect loans. "Although the rate increase may worry some HELOC borrowers, they should keep in mind that a rate increase of 0.25 percent is going to have a minimal effect on their monthly payment," said Mike Kinane, General Manager, Home Equity Products, TD Bank. "But, if a borrower is concerned with potential increases in rate, they should contact their lender to learn more about HELOC features, such as converting all, or a portion, of the balance to a fixed rate option."
Almost half of borrowers listed interest rates as the most influential factor when deciding on a HELOC, which is over twice the second most influential factor: loan amount. Additionally, 36 percent of borrowers list the lower interest rates as the most valuable aspect of a HELOC compared to other options.
TD Bank found that Millennials are the largest users of HELOCs. Of those surveyed, 39 percent of millennials were HELOC users, compared to 31 percent of Gen-Xers and 31 percent of Baby Boomers. Over twice as many Millennials as Gen-Xers are considering applying for a HELOC I the next 18 months, and nine times more than Baby Boomers.
"It's encouraging to see so many people–especially the younger generation–taking advantage of the increase in their home equity through a HELOC, but at the same time, it's surprising that many HELOC users lack confidence in their knowledge about how to use them," said Kinane. "Lenders can answer questions, dispel myths around HELOCs and educate to build borrowers' confidence."