Study reveals generational divide in HELOC use


Most of the time, when a homeowner takes out a HELOC, the plan is to use the proceeds to fund home renovations. And, with tax laws put into place by the Trump administration in late 2017, there’s a disincentive to use the proceeds to finance other things, as the interest won’t be tax deductible.

But a recent survey of 1,003 HELOC or future HELOC borrowers by Citizens Bank revealed that younger borrowers are much more open to using the loan for things other than home renovation, shedding light on a generational divide in the way homeowners utilize their home equity.

While 70% of the time a HELOC is used to fund renovations, this is not always the case, and Millennials are more likely to use the loan for other purposes than borrowers over 40.

Here’s a list of other uses for the proceeds, and how Millennial usage stacks up against that of older borrowers:

  • Finance a new business venture (45% vs. 19%)
  • Make a big-ticket purchase (44% vs. 35%)
  • Take time off work to care for family (44% vs. 24%)
  • Take a vacation (36% vs. 17%)

Among all HELOC borrowers, the survey also revealed an overwhelming sense of optimism, with 87% saying they were optimistic about their home’s value.

The results suggest that even though home price growth is slowing down, many consumers are undeterred, focusing instead on the fact home prices are still strong.

And, the fact that U.S. homeowners have amassed record amounts of home equity is not lost on them.

When asked to specific reasons for their optimism, 65% of respondents cited the fact that they’ve seen their home value increase in recent years. Half credited affordability, while 43% named the strong economy and 31% said they are feeling good about the current state of the housing market.

Brendan Coughlin, president of consumer deposits lending at Citizens Bank, said the prevailing sense of optimism highlights the solution a HELOC affords those looking to take advantage of rising home values.

“Property values are at record highs across most of the U.S., driving increases in consumer optimism,” said Coughlin. “Having access to a HELOC provides real-time access to their growing home equity, giving customers flexibility to improve their home, manage their finances, and peace of mind in case of an unexpected expense.”

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