Homeowners have begun to invest more in their homes as property values continue to rise, according to TD Bank.
Of the 1,350 homeowners in the bank's survey from late December through early January, about 56% believe their home’s value has increased and about 60% say that they would use the rising equity to finance renovations. About 53% of Millennials are considering this option.
"Consumers have been reluctant to start home renovations in recent years because of all the uncertainties in the economy," said Mike Kinane, senior vice president of home equity for TD Bank. "It's encouraging to see a growing appetite for these projects.”
“A home equity line of credit can be an attractive way to finance renovations,” he said. “HELOCs give homeowners the flexibility to borrow needed funds over time, during the renovation process, and then offer an interest-only repayment option throughout the draw period which is typically 10 years."
Here's an overview of results from the Home Equity Sentiment Index Survey:
- Renovations at the top of most consumers' lists include kitchens (42%), bathrooms (25%) and other household projects (11%).
- Homeowners are attracted to HELOCs because the loans allow them to borrow as needed over time (32%) and provide greater flexibility for use of the loan (24%).
- Interest rates are the biggest factor (57%) in choosing a HELOC, followed by trust in the lender (23%).
Here are the results specific to Millennials:
- Among those surveyed, Millennials (30%) are more likely to have a current HELOC than Gen Xers (16%) or Baby Boomers (12%)
- Millennials are also more likely (15%) to apply for a HELOC in the next 18 months than people in any other age groups.
- Millennials would like to use a HELOC to renovate a home (53%).
“With a tight home inventory environment, HELOCs give Millennials the freedom to make necessary renovations to existing properties and bring their dream homes to life," said Kinane.
The greatest advantage for Millennials in this process is their knowledge, according to TD Bank. Whereas many of the other generations are confused about how HELOCs work, Millennials tend to have a better understanding of it.