Millennials More Apt to Use HELOCs Outside the Home

Homeowners are banking on their house’s rising value, with younger generations more likely to use home equity lines of credit for a shopping list of wants outside the home.

Citizens Bank of Providence, R.I., surveyed 1,003 homeowners who had or were considering getting a HELOC.

Overall, 70% of respondents said they planned to use their HELOC for home improvement projects. But millennial homeowners were significantly more likely than those over age 40 to use a HELOC for non-traditional uses, including:

• Financing a new business venture (45% v. 19%);
• Big-ticket purchases (44% v. 35%);
• Taking time off work to support or care for family (44% v. 24%);
• Taking a vacation (36% v. 17%).

“Whether consolidating debt, financing education or accessing emergency funds, HELOCs can enhance your life, not just improve your home,” said Brendan Coughlin, president of consumer deposits and lending at Citizens Bank.

The survey follows a year when first-lien mortgage originations began dropping for credit unions, while they saw an uptick in home equity lines of credit and other second-lien mortgages.

HELOCs and other second-lien residential loans rose 25.1% to $80.4 billion in 2018 as first-lien residential mortgages grew 9.2% to $371.1 billion, according to NCUA data.

Three credit unions reflecting this trend last year were:

• Tower Federal Credit Union of Laurel, Md. ($3 billion in assets, 186,642 members), where first-lien mortgages rose 7.3% to $470.5 million, while second-liens rose 32.3% to $796.2 million.
• Mountain America of Salt Lake City ($8.2 billion in assets, 796,578 members), where first-lien mortgages rose 14.1% to $1.6 billion, while second-liens rose 25.5% to $710.1 million.
• Bellco Credit Union of Denver ($4.5 billion in assets, 326,057 members), where first-lien mortgages rose 2.6% to $566.8 million, while second-liens rose 16.6% to $555.3 million.

Among banks, one- to four-family residential mortgages rose 2.7% to $2.1 trillion in 2018, following a 3.4% increase in 2017.

Home equity lines among FDIC-insured banks fell 8.6% to $375.7 billion in 2018, following a 5.3% drop in 2017. FDIC data shows a third of those HELOCs were held by Bank of America of Charlotte, N.C., Wells Fargo Bank of Sioux Falls, S.D. and JPMorgan Chase Bank of Columbus, Ohio.

The Citizens Bank survey also found 87% of homeowners with access to HELOCs were optimistic about their property’s current value, with 74% interested in starting a home improvement project in the next 12 months. Two-thirds said their optimism stemmed from seeing value of home increasing in recent years.

“Property values are at record highs across most of the U.S., driving increases in consumer optimism,” Coughlin said. “Having access to a HELOC provides real-time access to their growing home equity, giving customers flexibility to improve their home, manage their finances, and peace of mind in case of an unexpected expense.”