While there are a variety of uses for accessing home equity through a second mortgage, the top reason cited by borrowers in a recent survey was home improvements.
Homeowners are motivated to access home equity by several factors, according to a report from Solidifi. The findings were based on two survey’s of more than 1,500 adult U.S. borrowers by the appraisal management company. It’s the fourth annual survey for Solidifi.
Over the next three to five years, 14 percent of homeowners surveyed intend to take out a home-equity loan or open a home-equity line of credit, according to the findings. Among those planning to open a HEL or HELOC, more than half expect to do so within the next 24 months.
The top three reasons for utilizing a home-equity product instead of other options were interest rates, research and the flexibility to have cash available. Other factors included rising home prices, tappable equity and marketing by a lender.
Home improvement was the No. 1 reason for getting a closed-end or open-end HEL, with 75 percent citing it. Among this group, 81 percent want to renovate their kitchen or bathroom, 38 percent want an addition for living or home office space, and 21 percent want to add a pool.
Solidifi noted that while two-thirds of homeowners shopping for a home-equity product considered more than one lender — 81 percent stuck with a lender they used in the past.
“The customer experience is critical to winning future business, and the mortgage process can be a gateway for lenders to build customer loyalty,” Solidifi President Loren Cooke said in the news release. “In fact, 96 percent of very satisfied borrowers were very likely to use their lender again, and 72 percent were likely to recommend their lender. In the current market, good experiences and relationships were four times more likely than interest rates to drive repeat business with a lender. The results showcased that good relationships and experiences build not only trust but also loyalty towards lenders — equating to future business.”