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Benefits of HELOC in these Uncertain Times

Benefits of HELOC in these Uncertain Times
In: Blog

Homeowners in the US mortgage market currently have record-breaking equity, making home equity line of credit, or HELOC, one of the best options for finance on the market. Americans now have more than $18 trillion in aggregate home equity.

What is HELOC and how is it scoring at the moment

A HELOC is a type of loan that is secured by a house. It works a lot like a credit card. It is a second mortgage that gives people access to cash based on the value of their homes. HELOCs typically have lower interest rates than home equity loans and personal loans.

A major reason why HELOC is so in demand is the dramatic rise in home prices over the last couple of years. In the second quarter of 2022, nearly half of mortgaged residential properties were considered “equity-rich.” This meant that mortgages and other home loans covered no more than half of their value, according to studies by some real estate data firm.

Why are homeowners seeking HELOC

Given the current market situation, HELOC has managed to take away the spotlight from cash-out refinancing which used to be the most popular way to turn equity into cash. HELOCs have grown significantly in popularity in the last year because they allow homeowners to withdraw cash from their homes without changing the interest rate on their entire mortgage loan.

According to TransUnion, while a borrower’s interest rate on a HELOC may be higher than the interest rate on the mortgage, it is still likely to be lower than the interest rate on a personal loan.

In fact, HELOC rates increased after the Federal Reserve raised its benchmark interest rate for the fourth time this year in a bid to combat inflation, and experts believe that HELOC rates will keep going up.

According to studies, there are several reasons why people consider tapping their home’s equity. On an average, 23.96% homeowners have considered HELOC help consolidate some form of debt recently. HELOC mostly comes with lower rates as compared to other financial instruments like credit cards, as using one to pay off high-cost debt can help borrowers save money.

Considering the volatility of the market, people are looking for faster ways to cash out on their home’s equity. There are various purposes for which people use HELOC. Some of the primary reasons include:

  • Making home improvements
  • Consolidating debt
  • Getting money for non-home improvement investments
  • Getting additional retirement income
  • Other reasons

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How lenders can capitalize on the HELOC boom

It is important that lenders act on the knowledge of the HELOC demand spike and anticipate customers’ needs. Since HELOC financing is more readily within reach of homeowners, lenders need to step up efforts to enhance their strategy to engage borrowers. There are a host of opportunities available for intelligent lenders who want to make the most of the demand rise in home equity.

There are several areas that you can focus upon as a lender to capitalize on the excellent opportunity. Here are some of them:

  • Boost your digital ecosystem to save the time of your team and your customers
  • Streamline the mortgage process and services in loan boarding
  • Automate the lending process with APIs
  • Leverage data as a strategic asset
  • Offer in-person help, but promote digital applications
  • Reduce the effort in the lending process with a customizable and user-friendly interface
  • Add an online pre-qualification analysis to filter your customers

How PrivoCorp can help in HELOC processing

While HELOCs are easier to process than a new mortgage, they still need basic processing and data management. If your organization isn’t equipped to handle the workload or needs help with services in loan boarding, PrivoCorp can help.

PrivoCorp can help you reduce the costs involved in HELOCs processing and increase your efficiencies. Through a flexible engagement model, PrivoCorp helps you lower your fixed costs for HELOCs and simplify the processing further.

We also offer a robust technology platform and allocate the details to relevant teams as per customers’ information. The result is that you can commit faster and offer smarter loans to your customers.

If you’re ready to scale your business and leverage the growth of HELOC, talk to our experts today.

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