While half of consumers with a home equity line of credit (HELOC) actually used that money for home renovations, many of those borrowers used the cash for other needs as well, according to a new survey from TD Bank.
Debt consolidation topped consumers’ other motivations for taking out a HELOC, with about 29 percent of survey respondents giving that as a reason for borrowing against the value in their homes. Major home purchases (24 percent), emergency funds (19 percent) and education costs (20 percent) filled out the list.
TD Bank’s inaugural Consumer Borrowing Index surveyed more than 1,364 randomly selected American homeowners with a HELOC between Oct. 7 and Oct. 15 of this year in conjunction with Vision Critical’s Financial Service Practice.
Among other findings, TD Bank said that 27 percent of respondents used the loan to purchase a new vehicle, while only 21 percent actually anticipated using it this way. Similarly, 18 percent used the HELOC for medical and health care expenses, while just 14 percent thought they would use the money for those costs, and 24 percent used the money for emergencies, while only 19 percent anticipated that need.
According to TD Bank’s survey, 30 percent of homeowners are applying for a HELOC of $100,000 or more, while the average loan secured totaled about $87,000.
The survey also uncovered some common misperceptions about HELOCs. For instance, while almost half (47 percent) of those surveyed were paying some form of HELOC fee, one in five were unsure as to whether they were paying any fees. Additionally, half of respondents said they did not know if they had any fixed-rate opportunities during their draw period.
According to the index, 59 percent of Millennials surveyed thought HELOC rates were higher than student loan interest rates, and 43 percent thought HELOC rates were higher than credit card interest rates.
Finally, TD Bank’s survey found that concerns about repayment actually declined with age. For instance, 73 percent of Millennials are extremely or very concerned about repayment, while 30 percent of Gen-Xers and only 8 percent of Baby Boomers said they were extremely or very concerned.
