On average, 48.59% of people seeking a home equity loan or HELOC in the nation’s 50 largest metropolises cited improving their home as their primary reason. That’s according to a new report from LendingTree which analyzed home equity loan (HELOC) offers made by lenders to LendingTree users throughout 2021.
When a homeowner uses the LendingTree platform to search for a home loan or HELOC lender, the company asks the user to select one of five reasons they are looking for the money. These reasons are:
- Make home improvements
- Debt consolidation
- Get money for investment purposes not related to home improvement
- Get extra retirement income
- Use the money for another reason
Home improvement was the most popular reason in every subway featured in its report, the company said. LendingTree was able to determine the popularity of each of these reasons in the 50 largest metropolitan areas in the country.
Key Additional Findings
- An average of 23.96% of homeowners have considered tapping into their home equity to consolidate debt. Since home equity loans and HELOCs often come with lower rates than other types of debt, like credit card debt, using one to pay off high-cost debt can help borrowers save money. money.
- Using home equity for investment purposes unrelated to home improvement was the main purpose for an average of 9.16% of owners. The money generated can be useful for activities such as investing in a small business. That said, those considering investing with their home equity should be especially aware of their responsibility to return the money, even if the investment does not materialize.
- Only 1.43% of owners are planning to use the equity in their home as retirement income. Retirees who have generated considerable equity in their home might show an interest in tapping into it as a temporary boost to their income. But this strategy should not be pursued lightly. Like any debt, the money must be repaid, even if you are retired.
- A large percentage of owners– an average of 16.85% – have considered a home equity loan or HELOC for a reason other than those listed above. While the company said it wasn’t clear how these potential borrowers hoped to use their home equity, they might have wanted us to pay for school, a wedding or emergency-related expenses.
Metro areas where the highest proportion of homeowners have considered leveraging their home equity to improve their housing
- No. 1 – Boston (54.33%)
- No. 2 – Philadelphia (52.96%)
- No. 3 – Milwaukee (52.78%)
Metro areas where the largest share of homeowners considered tapping into their home equity to consolidate debt
- No. 1 – Las Vegas (31.82%)
- No. 2 – Phoenix (28.27%)
- No. 3 – Louisville, Kentucky (28.04%)
Metros where the largest share of homeowners have considered leveraging their home equity for non-home improvement investment purposes
- No. 1 – San Jose, Calif. (16.95%)
- No. 2 – Miami (14.00%)
- No. 3 – Austin, TX (13.08%)
Metro areas where the highest proportion of homeowners have considered leveraging their home equity for retirement income
- No. 1 – Las Vegas (2.50%)
- No. 2 – Los Angeles (2.16%)
- No. 3 – Miami (2.08%)
Metro areas where the largest share of homeowners have considered tapping into their home equity for another reason
- No. 1 – San Jose, Calif. (24.13%)
- No. 2 – Los Angeles (21.11%)
- No. 3 – San Francisco (21.05%)
The take-out sale
“Since the start of the coronavirus pandemic, home prices in many parts of the United States have risen dramatically. In turn, many homeowners have seen their home equity increase. For this reason, it’s no surprise that millions of Americans have considered a home equity loan or home equity line of credit (HELOC) in 2021,” the report read.
To view the full report, go to https://www.lendingtree.com/home/mortgage/reasons-for-home-equity-study/.
Jacob Channel is the author of the full report. He is the Principal Economic Analyst at LendingTree.