Opinion: Here’s What Borrowers Really Think About Home Equity Lines of Credit


“Trust, but verify,” is not just wise political advice, made famous by President Ronald Reagan. It is also useful when evaluating financial news.

Recently, I read with interest a series of stories about Home Equity Lines of Credit (HELOC). These financial products are essentially a second mortgage in which you can convert the market value of your home into cash. Financial periodicals both praise these instruments for giving consumers flexibility and disparage them because they can add risk to the financial system.

To check if consumers are more interested in HELOCs, I checked with several loan advisors in my company who work in branches across the country. They speak directly to consumers every day, and it is worth noting their views on this topic that has captivated financial specialists.

First, it is clear that consumers are interested in debt consolidation. Rising home prices have reduced affordability. Demand has also declined considerably. At the same time, many homeowners have built up equity in their homes, which has been a net positive as home prices have risen.

We have found that homeowners are leveraging this value to retrofit their current homes, rather than swapping to buy a new home. Since mortgage interest rates are still relatively low, home equity loans are also used to consolidate debt, to pay off even more expensive instruments like credit cards, auto loans, and personal loans. This is a welcome development, as consumers can benefit from a stronger financial base.

Additionally, “the need for HELOCs has decreased as there has been an increase in loan programs that have lower down payments,” said Lindsay Simmons, a loan consultant based in Reston, Va.

Second, consumers are focused on tariffs. “Most customers who ask about HELOCs worry about interest rate fluctuations,” says Katie Simmons Hickey, Sales Manager also based at Reston. “They love the fixed rate options that some mortgage providers offer. We are asked about the risks and costs of HELOCs, and many see them as emergency options, if they need the money. Consumers shop around to find the best deal they can find among mortgage providers.

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Consumers frequently ask our loan advisors about the pros and cons of HELOCs. It is extremely important that all mortgage providers answer these questions thoughtfully. Ensuring that customers understand the risks associated with these products is essential to maintaining a vibrant housing market and a prudent financial system.

Third, consumers rate products other than HELOCs.

That’s because HELOCs aren’t the only way to convert home equity into cash. For example, consumers are considering bridging loans, “trying to leverage the value of their home with fewer contingencies than a HELOC,” said Josip Capelj, a loan consultant in Detroit.

“Many homeowners who bought their property some time ago have significant equity positions,” said Tim Cooper, a loan consultant based in Chico, Calif. “They are also considering a cash refinance.”

Bottom line: Consumers are not rushing to withdraw HELOCs en masse. They carefully consider their options and we support them every step of the way.

Sanjiv Das is CEO of Caliber Home Loans, one of the largest housing companies in the United States. He was CEO of CitiMortgage from 2008 to 2013.

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