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Homeowners have big renovation plans this year — but paying for them? That’s another story

Aly J. Yale
The Mortgage Reports contributor

Homeowners want HELOCs but aren’t sure what they are

Nearly one in two homeowners is planning to renovate in the next two years. Though HELOCs offer a good source of funding for these projects, according to a new survey, many homeowners don’t even know what these financial products are.

Verify your new rate (Aug 25th, 2019)

Ready to renovate

A new survey from TD Bank shows that 48 percent of homeowners plan to renovate their properties in the next two years. A third of those plan to spend $50,000 or more on their projects.

How will they pay for these expenses? The survey shows most plan to use savings and checking accounts, with personal credit cards and home equity lines of credit (HELOCs) close behind.

Given Federal Reserve Chair Jerome Powell’s recent hint toward a Fed rate cut, HELOCs could be one of the more affordable options to borrow funds in the near future.

Verify your new rate (Aug 25th, 2019)

HELOC who?

There’s a problem, though: many homeowners don’t know what HELOCs are. Nearly one in four can’t define a HELOC. Another 16 percent don’t understand how a HELOC’s variable rates would impact their monthly payments.

On top of this, a third of homeowners don’t know how much equity they have in their home — or how much they could even tap via a HELOC.

Jon Giles, TD Bank’s head of home equity lending, explains, “We’ve found that many homeowners simply aren’t aware of how they can leverage the equity in their homes. Home equity financing is ideal for projects that will add value to one’s home, such as a renovation. It’s also frequently tapped to consolidate higher-interest-rate debt or to help with education expenses.”

Best home equity lenders for 2019

According to the most recent Mortgage Monitor from data firm Black Knight, the average homeowner has about $136,000 in tappable equity.

Should you use a cash-out refinance to pay for a HELOC or home equity loan?

Get today’s mortgage rates

Considering renovating your home? Then shop around and see what financing options you have today.

Verify your new rate (Aug 25th, 2019)