On average, 48.59% of people seeking a home equity loan or HELOC across the nation’s 50 largest metros cited making home improvements as their primary reason. This is according to a new report by LendingTree that analyzed home equity loan (HELOC) offers made by lenders to LendingTree users through the entirety of 2021.
When a homeowner uses the LendingTree platform to look for a home equity loan or HELOC lender, the company asks the user to select one of five reasons why they’re seeking the money. Those reasons are:
- Making home improvements
- Consolidating debt
- Getting money for non-home improvement investment purposes
- Getting extra retirement income
- Using the money for another reason
Making home improvements was the most popular reason in every metro featured in its report, the company stated. LendingTree was able to determine how popular each of these reasons was across the nation’s 50 largest metropolitan areas.
Additional key findings
- An average of 23.96% of homeowners considered tapping their home’s equity to help consolidate debt. Because home equity loans and HELOCs often come with lower rates than other types of debt—like credit card debt—using one to pay off high-cost debt can help borrowers save money.
- Using a home’s equity for non-home improvement investment purposes was the main goal for an average of 9.16% of homeowners. The money generated can be useful for activities such as investing in a small business. That said, those who plan to invest with their home’s equity should be especially aware of their responsibility to repay the money — even if the investment doesn’t pan out.
- Only 1.43% of homeowners considered using their home’s equity as retirement income. Retirees who’ve generated considerable equity in their home might show interest in tapping into it as a temporary boost to their incomes. But this strategy shouldn’t be pursued recklessly. Like any debt, the money needs to be repaid, even if you’re retired.
- A significant percentage of homeowners—an average of 16.85%—considered a home equity loan or HELOC for a reason other than those listed above. Though the company said it doesn’t know specifically how these potential borrowers had hoped to use their home’s equity, they may have wanted one to pay for college, a wedding or emergency-related expenses.
Metros where the largest share of homeowners considered tapping home equity for home improvements
- No. 1 — Boston (54.33%)
- No. 2 — Philadelphia (52.96%)
- No. 3 — Milwaukee (52.78%)
Metros where the largest share of homeowners considered tapping home equity for debt consolidation
- No. 1 — Las Vegas (31.82%)
- No. 2 — Phoenix (28.27%)
- No. 3 — Louisville, Ky. (28.04%)
Metros where the largest share of homeowners considered tapping home equity for non-home improvement investment purposes
- No. 1 — San Jose, Calif. (16.95%)
- No. 2 — Miami (14.00%)
- No. 3 — Austin, Texas (13.08%)
Metros where the largest share of homeowners considered tapping home equity for retirement income
- No. 1 — Las Vegas (2.50%)
- No. 2 — Los Angeles (2.16%)
- No. 3 — Miami (2.08%)
Metros where the largest share of homeowners considered tapping home equity for another reason
- No. 1 — San Jose, Calif. (24.13%)
- No. 2 — Los Angeles (21.11%)
- No. 3 — San Francisco (21.05%)
“Since the start of the coronavirus pandemic, home prices in many parts of the U.S. have risen dramatically. In turn, many homeowners have seen the amount of equity they have in their homes increase. Because of this, it’s no surprise that millions of Americans considered a home equity loan or home equity line of credit (HELOC) in 2021,” read a statement in the report.
To view the full report, visit https://www.lendingtree.com/home/mortgage/reasons-for-home-equity-study/.
Jacob Channel is the author of the full report. He is the Senior Economic Analyst for LendingTree.