Just over 1% of requests were to fund retirement
Home equity loans requested since the start of 2018 were most commonly used for home improvement, a new study by LendingTree has found.
In its assessment of home equity loan requests since, LendingTree data tracked six uses for home equity loans: home improvement, debt consolidation, retirement income, investment property, emergency funds, and other uses.
The study found that 42.9% of requests were for home improvement, topping the list of uses for home equity loans. Debt consolidation accounted for 38.2% requests, other reasons took up 9.3%, and other investment purposes were 7.8% of the requests.
Just over 1% of requests were to fund retirement. LendingTree found that the cohort had the highest average age of 63 — 12 years above the next highest average age. Meanwhile, 0.2% of requests were to access home equity for emergency expenses. The group had the lowest loan amount requested, $35,747.
Requests for investment property purposes accounted for 0.3% of the total. Additionally, LendingTree found that real estate investors borrow the most. Borrowers who were looking to invest in another property had the highest property values and requested loan amounts. For property investments, borrowers requested an average of $103,625. For non-property investments, which likely include small businesses, borrowers requested $80,241.
“Home prices have been steadily increasing and have now surpassed the pre-financial crisis highs,” LendingTree Chief Housing Economist Tendayi Kapfidze said. “While this may pose a challenge for those looking to purchase homes, those who own homes can stand to benefit by leveraging the growing equity in their homes, using those funds for other expenses.”
“Responsible home equity borrowing can be a valuable source of funds for life events,” Kapfidze said. “It’s important to note that this new wave of home equity lending is far different from the equity extraction that occurred prior to the financial crisis, and lending standards are much more stringent today. Most home equity borrowers today have far higher credit scores and borrow less of the accumulated appreciation in their home.”
