THE VALUE OF HOME EQUITY

darren-nolander-home-equity-featuredThere are a few things on the minds of today’s homeowners: taxes, new tax reform laws, savings and home renovations. I came across a survey by LendEDU the other day that made me think now was the perfect time to tackle these subjects in relation to our borrowers and our home equity loan product.

First off, the LendEDU survey highlights the fact that many borrowers do not fully understand the new tax laws and their implications. Only 4.4 percent of the survey’s respondents correctly identified that the new law would eliminate a borrower’s ability to deduct interest costs from a home equity loan. This is obviously a downside to the new tax laws but, as the survey points out, home equity loans are still a popular product in today’s market, and for good reason.

LendEDU found that 52.2 percent of respondents were taking out home equity loans to fund home improvement projects, which is a great way to reinvest in one’s future. Participants didn’t disagree, as 89.4 percent said they felt confident home improvements would increase the value of their property, and we know home equity loans are one of the cheapest sources of such funding. This was also a popular vehicle for those looking to consolidate debt. A full 23 percent of respondents said they planned to utilize this product thanks to its lower interest rate when compared to the rates traditionally affixed to credit cards, student loans, personal loans and even auto loans. In fact, a majority of these debt consolidators (75.54 percent) said they planned to use a home equity loan to consolidate their credit card debt, which can maintain interest rates as high as 29.99 percent! That is insane, considering an average fixed APR hovers around 4.89 percent!

Consumers are willing to take out these loans, consolidate debt and reinvest in their properties through renovations because many (83.8 percent) believed the value of their homes would increase over the next three years. A solid 74.1 percent believed their home’s value would continue to increase over the next 10 years, showing great confidence in this real estate market.

We all know the value of this great product: lower interest rates than most other loans, a great way to consolidate debt and a convenient vehicle to fund a home renovation that can easily raise the value of your home. Let’s make sure our borrowers don’t lose sight of all the benefits and value home equity loans can bring to them as media attention shifts to changes in tax law. While these changes can have some negative impact, in many cases the upside of home equity loans far outweigh this minor setback to the tax laws.

Western Division Business Development Manager

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