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Article – More Home Owners Tap Equity Loans
Home equity lines of credit, or Helocs, and home equity loans soared 8 percent in the first quarter of this year compared to a year earlier, according to Inside Mortgage Business. It marks the largest share of home equity lines of credit since 2009.
The rebound in home prices are prompting more home owners to borrow against their properties’ equity, a practice once blamed for igniting the financial crisis.
Still, home equity lines of credit are well below their peak during the third quarter of 2006, when they stood at $113 billion. In the first quarter of this year, such lines of credit stood at $13 billion.
“We’re seeing much more aggressive marketing campaigns [for Helocs] by banks in locations where home prices have risen,” Amy Crews Cutts, chief economist at Equifax Inc., told The Wall Street Journal, adding that the rise in Heloc originations has been in line with the rise in home-improvement projects. “We expect to see quite an uptick in Heloc activity” in the spring, she notes.
Bank of America Corp. has reported that customers opened $1.98 billion in Helocs in the first quarter, a 77 percent increase compared to the first quarter of 2013. Wells Fargo & Co. has reported that its Heloc and home-equity loan originations were up 33 percent last year. The bank did not have first-quarter data available yet.
But lenders are being more stringent nowadays with Helocs, reserving them only for borrowers with good credit and in locations where home values are on the rise, says Keith Gumbinger, vice president of HSH.com, a mortgage resource site. While home owners were once able to borrow up to 100 percent of their home’s value, banks are now usually only allowing home owners to take out a maximum of 80 percent or 85 percent, Gumbinger notes.
Source: “Borrowers Tap Their Homes at a Hot Clip,” The Wall Street Journal (May 29, 2014)
Read more:
Number of ‘Equity-Rich’ Home Owners Is Growing
As Home Equity Returns, More Home Owners Remodel
Return of Equity Brings Back Cash-Out Refis
© 2014 National Association of Realtors® All rights reserved. Reprinted with permission of the National Association of Realtors®.
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