Digital Risk was recently quoted in TheStreet.com for its recent survey on HELOC. The article titled You Have No Idea How to Use a Home Equity Line of Credit highlights interesting statistics from the survey.
US consumers have no problem piling up debt, but they’re petrified of a home equity line of credit mostly because of lack of awareness. One in five are unfamiliar with HELOCs altogether, while 30% do not know how to apply for one!
According to the Digital Risk survey, just 22% say they would currently consider borrowing against equity for financial needs such as tuition, medical expenses or debt consolidation. Some 65% of respondents said they had never taken out a home loan, although 78% said they were familiar it. More than half have over $100,000 in home equity. It’s not that they don’t know what a home equity line of credit is (only 21% never heard of it) or don’t know how to open one (only 30% don’t). Of the minority considering a HELOC, 58% would use it for home improvements, 48% would apply it to a health emergency and 32% would pay down other debt. Credit card consolidation (18%) and purchase of a second home (15%) also factored into the decision.
“Homeowners are using debt for responsible reasons, like affordable improvements that increase the value of their homes,” said 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% interest.”
“There is greater scrutiny of the lending market now and more attention on the part of the lenders to credit quality, which is another positive sign for the health of the overall mortgage market,” says Taylor. “Rates are likely to rise this year – and the activity we are seeing is homeowners being judicious about how they use debt in the face of that reality.”
Over 80% of current homeowners say their mortgage payment is preventing them from saving more money. In fact, more than one in three mortgage holders report that their monthly payment has a “major impact” on their ability to save. That’s where a HELOC could come in handy, assuming you understand the intricacies of the loan.