Home Equity Loans are Making a Comeback

December 01, 2012

chicago new home equityHome equity lines of credit have risen to $79.6 billion, the highest level since 2008, according to Moody’s Corp.

A home equity lines of credit, also known as a ‘HELOC,’ is often used to pay for home renovations and repairs, so increased distribution of HELOCs means the remodeling market is picking up. Renovation spending is expected to rise to $120.7 billion by the end of 2012, a $6.7 billion increase from 2011.

Home equity lines of credit differ from traditional loans in that the interest rate is variable and the borrower pays off the loan similar to paying off a credit card. A HELOC may have a minimum monthly payment that consists of only interest.

The rise in HELOC distribution is worth noting since an increase in home equity lines boosts the economy by fueling purchases of major goods such as TVs and refrigerators. Another factor related to the increasing HELOC rates is the median U.S. home price, which is growing at the fastest pace since 2005.

However, lenders are still a bit wary of being overly generous with HELOC distribution. During the pre-2008 housing boom, lenders often approved lines of credit that exceeded home values. Some homeowners used this line of credit to go on spending sprees that included purchases such as cars, televisions and even luxury vacations.

As the Chicago new homes market begins to stabilize, it is expected that lenders will eventually give out more equity, and that homeowners will spend their equity in a way that should have a positive impact on the overall economy.

About The Author

Read All Stories By Mitch Levinson

Mitch Levinson is the author of “Internet Marketing: The Key to Increased New Home Sales” published by BuilderBooks. He is an Internet marketing expert with expertise in search engine optimization, website development, email marketing, social media and CRM consulting services. He is known for creating effective programs that can be tracked through analytics to prove effectiveness and ROI. Mitch is founder and president of MLC New Home Marketing and MLC FlatFee Realty, as well as managing partner of mRELEVANCE, LLC, a Marketing, Communication, Interactive agency with offices in Chicago and Atlanta. He currently leads the Chicago team. A Multi-Million Dollar Sales Producer who earned an MBA in Computer Information Systems and eCommerce, he brings a unique perspective and experience to the field of real estate communications. Mitch combines the two interests in order to help home builders and developers gain a competitive advantage through the Internet and technology. When he isn’t behind a computer, he enjoys participating in sports and coaching his kids’ teams. Mitch resides in Arlington Heights, Ill., a northwest suburb of Chicago, with his family, which includes two rambunctious labs. Visit my Google+ profile.

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