There comes a time in homeownership where remodeling comes into consideration. Though many wish they had disposable income readily available to renovate their home, most times homeowners find themselves taking out a loan. Recent studies by Bank of America show that more than 36 percent of first-time homebuyers wouldn’t consider using a home equity line of credit, or HELOC, because they simply aren’t aware of what they are or how they work. So how can HELOCs be better explained to buyers so they are aware of the opportunity? To find out more, MReport asked Dave Gorman, Divisional Sales Executive at Bank of America.
Q: Other than lack of understanding, what are some reasons people hold back from using a HELOC?
A: Lack of understanding is a clear barrier revealed in the 2017 Homebuyer Insights Report. In many cases, homeowners need to wait a few years to grow the equity necessary for a HELOC, and to build a strong overall financial picture. We employ responsible lending standards when it comes to HELOCs, so our clients can be financially successful.
Q: What are the advantages of using a HELOC versus a credit card or a loan that is not tied to home equity?
A: A HELOC allows owners to secure credit from their home, which can be used for major projects such as home renovations, among other possibilities. HELOCs often have lower interest rates than credit cards and the interest you pay is typically tax deductible. HELOCs also offer a great level of flexibility in payment options as when compared to a credit card.
Q: What advice do you have for first time homebuyers to get more educated on HELOCs and other information regarding home buying?
A: When considering a HELOC, any owner, whether new or experienced, should consult with a financial advisor or loan officer about the opportunities available to them. It takes time to build the equity necessary, but can be a worthwhile venture due to a HELOC’s flexible nature and many benefits.
Making smart improvements can positively affect a home’s value. It's a good idea to understand your home's current value and consult with a local real estate expert before investing in significant home improvements. There are tools online that enable you to make these calculations from home.