38% of Homeowners Who Are Renovating Plan To Use a HELOC — Here’s Why
Written by
Vance Cariaga
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Among the many effects of the historically expensive U.S. housing market is what the Urban Institute dubs the “I hate my house, but I love my mortgage” syndrome. That means homeowners who prefer to buy a new home are running up against a tidal wave of high prices, low inventory and rising mortgage rates that prevent them from doing so. But because many have also locked in low mortgage rates on their current homes, staying put suddenly seems like an attractive option.
For these homeowners, one way to get over the “hate” is to renovate their homes to give them a different look and feel. A large percentage of homeowners are doing that – and many are turning to home equity lines of credit (HELOCs) or home equity loans (HE Loans) to finance renovations, according to a new survey from TD Bank.
The online survey of 1,810 U.S. homeowners, conducted in the fall and released in mid-November, found that more than one-third (38%) of homeowners who are renovating in the next two years are either using or plan to use a HELOC or HE Loan. More than half (57%) of respondents who never had a HELOC or HE Loan said they are likely to apply for one in the next 18 months – a gain of 9% from 2022.
HELOCs provide a way to tap into your home equity for renovations and upgrades that can either make your home a better place to live or boost its value on the open market. The good news is, rising home values have lifted home equity across the United States.
The vast majority of survey respondents (83%) believe their home equity has increased within the last year. TD Bank cited a recent Black Knight report showing that the average U.S. homeowner had $199,000 in home equity as of June 2023, which represented a gain of $14,000 from the first quarter of the year.
“Home equity continues to be one of the more affordable ways that current homeowners can access funds to improve the condition of their home and increase its value,” Jon Giles, TD Bank’s Head of Real Estate Secured Lending Strategy & Support, said in a news release. “What’s most important is to borrow responsibly for things like renovations, education costs, large home purchases or debt consolidation – ensuring the money is used to benefit a homeowner’s overall financial position.”
Despite rising costs for labor and materials, home renovations are a big business in 2023. The TD Bank survey found that more than two-thirds (69%) of homeowners are currently renovating or plan to renovate their home in the next two years. Here are some of the main reasons cited:
- Cosmetic improvements (43% of respondents)
- Improve the qualify of outdoor space (43%)
- Make the home more eco-friendly (29%)
- Add key features (28%)
In terms of which rooms people want to renovate, the kitchen (54%) and bathroom (54%) tied for top honors, followed by the living room (38%).
These renovations don’t mean all homeowners are sticking around their current homes, however. The TD Bank survey revealed that 11% of renovators are taking on projects with the intent to sell, while one-third plan to move out within five years.
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