Home Equity Loans a New Reality?
Home Equity loans are worth looking into.
Are we really looking at Home Equity Loans? It’s hard to believe, but it is a reality again and here is the scoop…
Do you remember Home Equity Loans? A thing of the past? Not quite. A sharp increase in home prices over the last few years has given homeowners more equity to tap into, about $825 billion according to a recent report from Black Knight Financial Services. However, we do not think that tapping into that home equity is much more difficult than in the last decade, when many homeowners used their home equity lines like an ATM.
One of the key factors today (as it should be) is the customer’s credit. Home equity line lending has jumped some 40% from just a year ago, however it is still below what it was back in 2007 when the bottom started to drop out. Credit scores for new borrowers average a FICO score of 782, which is considered a very low risk. It also seems that many borrowers are using their home equity for much different reasons than a decade ago.
The difference today that ten years ago is that homeowners are using their home equity on things that they need vs. things that they want. (ie. Boats, vacations, etc) The whole shakedown of foreclosures, etc. has given way to “less is more” possibly. With that said, the home equity process has definitely shifted and it is much more like getting a mortgage. Interestingly, over one third of the equity is in California and in the top ten markets in the United States.
The good news, I guess, is that is still a product “home equity” and that it is available for those that have been fortunate to maintain high credit scores and to actually live in a market that home prices have increased enough to have “equity”. Will it change again? Probably. We never know with the fluctuation in different products and an interesting changing economy.