Ready for a HELOC? You’re not alone

It’s no secret that with interest rates rising, the number of homeowners refinancing is dipping. But here’s a surprising stat: The number of owners taking out home equtiy lines of credit — better known as HELOCs — is actually on the rise.


That’s the takeaway from the latest research from ATTOM Data Solutions.


ATTOM reported that 347,875 HELOCs were originated on residential properties during the first quarter of 2018. That is a significant number, and is an increase of 18 percent from the previous quarter and 14 percent from a year earlier.


This is especially impressive considering that most other mortgage business was down during this year’s first quarter. ATTOM said that 665,887 purchase mortgage loans closed in the first quarter of 2018. That figure is down 16 percent from the fourth quarter of 2017.


And refinances? Those are significantly down. ATTOM reported that 799,939 residential refinances closed during the first quarter of this year. That is down 11 percent from the same quarter one year earlier.


A HELOC, of course, is a great tool for funding everything from home improvement projects to your children’s college education. You can also use a HELOC to pay down high-interest-rate credit card debt.


It’s important to know how HELOCs differ from traditional home equity loans, though. A home equity loan is a second mortgage on your home. When you close one, your lender presents you with a lump sum of money that you can then use for whatever you’d like. You pay back this entire amount over time with interest, making monthly payments just like you do with your primary mortgage.


A HELOC works more like a credit card. Depending on the equity in your home, a lender will approve you for a maximum borrowing limit. If you have $80,000 of equity, your lender might approve you for a HELOC with a maximum borrowing limit of $60,000. You then only have to pay back what you borrow.


Say you have a HELOC of $50,000 and you borrow $20,000 for a kitchen remodel. You only have to pay back the $20,000 you borrowed, with interest, of course.


If you are interested in joining the growing number of homeowners taking out HELOCs, talk with a local mortgage lender. These professionals can help you determine if a HELOC is the smart choice for you.