Home equity lending is expected to boom in the coming years, and a recent survey from a leading consumer satisfaction company offers a window into what tomorrow’s borrowers may want from their lenders.
Almost two-thirds of borrowers with a home equity line of credit (HELOC) expressed concerns about the products, according to an inaugural survey on the topic from J.D. Power. In particular, respondents were worried about potentially borrowing beyond their means and the “variable nature of the loan.”
But those issues haven’t stopped overall interest in home equity, with the number of forward HELOCs expected to double to 10 million by 2023, according to a study from TransUnion cited by J.D. Power.
“Steadily rising home prices, rising equity in the home, and growing competition among lenders creates an opportunity for homeowners to tap into a low-cost source of funds,” Craig Martin, senior director of financial services at J.D Power, said in a release announcing the company’s findings.
While mortgage lenders — of both the forward and Home Equity Conversion Mortgage persuasion — often spend considerable budgets on advertising, the survey found that 88% of potential HELOC borrowers started the process on their own, with that number ballooning to 94% among millennials.
Additionally, 55% of all respondents they’d shopped around with at least one other mortgage lender before signing on the dotted line, with 66% electing to meet with potential partners in person. Perhaps unsurprisingly, that face-to-face component was markedly less important to millennials, as 59% used desktop computers to research HELOCs, while 50% used tablets or smartphones.
While the millennial generation — now officially defined as those born between 1981 and 1996 — is decades away from HECM eligibility, younger baby boomers and Generation Xers are increasingly comfortable with conducting mortgage business online, and several players in the reverse mortgage industry have expressed interest in virtual originations.
“Lenders need to recognize that the HELOC customer experience is a journey that beings with initial consideration and evaluation and extends through to usage, with each part of the journey affecting overall perceptions,” Martin said. “Increasingly, many steps in that process are occurring in digital and mobile channels, which are areas the industry has been slow to leverage and refine.”
Written by Alex Spanko