One of the casualties of the financial crisis/housing market meltdown was the category of HELOCs (Home Equity Lines of Credit). But the lending landscape for second mortgages — or lines of credit based on a property’s equity — is quickly rising, along with home prices.
CoreLogic reports that lenders approved nearly one million new home equity lines of credit with an aggregate credit limit in excess of $115 billion during the first nine months of 2015. That puts HELOC approvals during 2015 on pace for the highest rate since 2008.
And that’s more than double the volume just three years ago, says Dr. Frank Nothaft, senior vice president and chief economist for CoreLogic.
“Two factors driving the growing consumer interest in HELOCs are the growth in home equity and the desire of homeowners to keep their low-interest-rate first mortgage,” writes Nothaft.
In pre-crisis days, more homeowners considered “cash-out refinancing” of their first mortgages. But now the vast majority of homeowners have “already taken out a new mortgage with a very low interest rate,” Nothaft says.
Many homeowners are using HELOCs for home improvements or other needs. Remodeling spending has increased 27 percent during the past three years, along with the rise in HELOC approvals.