Homeowners Turn to Their Equity Again
As home values rise fast, homeowners are starting to realize they have a lot of wealth tucked into their homes, and it’s become enticing to tap into it.
Since the housing crash, homeowners have been shy about accessing any of their home equity, even those who still had money in their homes. But as millions of borrowers emerge from their underwater home loans and see their home values jump again, they’re turning to home equity lines of credit, or HELOCs, once again.
HELOC volume has increased 21 percent over the past two years. It’s now at the highest level since 2008, according to Moody’s data. Still, it is far from the levels of the housing boom.
“The more second liens that people take out, it adds a risk that comes from the rising home prices,” says Peter McNally, a senior analyst at Moody’s. “The fact that people are leveraging their homes more than before makes things more risky.”
Mixed with that, borrowers also are putting down smaller down payments. Prior to the last housing boom, the median down payment was just over 7 percent. Down payments dropped to 3 percent during the housing boom, but were back up to about 6 percent in 2016, according to ATTOM Data Solutions. Down payments are projected to move lower as more lenders offer greater low down payment options again.
Source: “More Homeowners Cashing in on Their New Housing Wealth,” CNBC (March 3, 2017)