Homeowners tap HELOCs at record level in first half of 2022
61% of homeowners said they considered a HELOC or mortgage refinance in the last year.
Borrowers are sitting on a record amount of equity, but high interest rates have led to fewer opportunities to refinance, CoreLogic said.
A HELOC is one way that borrowers can access a lump sum of money all at once when the home's value is higher than the mortgage debt. If you want to take advantage of your increased home value, you can consider taking out a HELOC.
But remember what happened during the mortgage crisis? I remember getting a letter from BOA that my credit line has been frozen and not allowed me to continue to use it. It happened to me ?
Did you know?
Most people don’t realize their HELOC interest only payment only applies for 10 years. Then it automatically converts to a 20 year fixed rate payment based on what the current rate is. That's kind of scary.
BAM, YOU ARE NOW IN FOR A SURPRISE AT HOW MUCH YOUR PAYMENT HAS JUMPED.
With a reverse mortgage line of credit, your credit line can never be reduced or frozen. It is protected for life! Plus, you only pay interest on what you use. Plus Plus, neither you, nor your heirs will never be responsible for your home being underwater,... like last time during the housing collapse.
Home prices cool, but home equity remains high
If you are interested in pulling equity from your home, you could consider a HELOC to help you pay down debt or fund home improvements. But, that still comes with an interest only payment around 8% and never pays down the balance.
Homeowners' still eager to tap into their home equity' despite higher rates
More than half of homeowners (61%) said they considered a HELOC or mortgage refinance in the last year, 35% of those respondents decided not to pursue the loan due to rising interest rates.
The survey said that homeowners taking out $50,000 in equity from their homes would use the cash in the following ways:
- 39% planned to use it for home improvement projects
- 31% planned to pay off existing debt
- 10% planned to invest it
- 6% planned to use it to start a business
"With interest rates in the news so much — and with the true cost of a loan increasing significantly in the last six months — it's telling that so many homeowners are still eager to tap into their home equity or feel as if they have no other good choices.
If you are interested in tapping the equity in your home, you could consider a HELOC or a Reverse Mortgage line of credit. The biggest difference between the two options, is that with a reverse mortgage line of credit is that he interest rate is much lower, it can never be taken away or frozen, and the value of line of credit can never be reduced. And oh yeah, YOU NEVER EVER HAVE TO MAKE A PAYMENT!
The only negative is that the closing costs are a lot more than a banks HELOC. But since YOU NEVER HAVE TO MAKE A PAYMENT, you will make that up quickly. And when the housing market accelerates its decline, it will never affect you.