Nov./Dec. 2021 Issue

The Time Is Now For Home Equity Lending

The historically low interest rates that continued last year led a record number of borrowers to refinance and/or consolidate high interest rate debt as a result. This influx was thrilling to many local lenders initially, but the flood of applications distracted from the future implications of those surging deposits. Now, the realization is ever-present, “how are we going to replace the past year’s loan volume?”

The first step lenders need to take is considering where the market is now. After the social and health events that started last year and have continued in 2021, many homeowners are looking to find a home to meet the needs of their new normal, including a larger living space for their entire family spending extended time at home or the capacity to work from home for prolonged periods. However, with the housing market’s low inventory and record-high prices, buying a new home may not be an option for people, many of whom are experiencing the pandemic’s influence on their finances, such as job losses or pay cuts. This has led many homeowners to study the potential of their existing home, contemplating renovations to meet those needs rather than a new home entirely.

Why Now?

With home values at all-time highs, this is a great time for borrowers to consider tapping into their increased equity and applying for a home equity loan. Borrowers can then use these home equity loans to create their dream home in their current home. Many people are already taking matters into their own hands, turning to home improvement retailers, such as Home Depot or Lowe’s, for the tools necessary to complete “do it yourself” (DIY) projects. In addition, a no-cost home equity line of credit (HELOC) could further assist those borrowers still healing from the financial strain of 2020. By making use of their home’s equity, borrowers can consolidate debt and make home improvements at rates lower than personal loans and credit cards – that is a win-win.

The benefits are for everyone involved in the process. It creates a golden opportunity for community lenders to offer home equity lending. With a simple, fast and repeatable process, home equity lending is a great option to help local lenders transition out of unprecedented times. These loans offer a low-risk profile that can easily help lenders amass loan volume, as many borrowers pay their mortgage before paying off other miscellaneous loans, such as auto loans. But, how can these lenders ensure borrowers will turn to them for home equity loans?

How to Differentiate Home Equity Offerings

One way to compete for homeowners’ home equity loans is by offering a fast, easy and predictable lending experience. In the past, home equity loans have been slowed by an old processing model, requiring loan officers to rekey information into multiple systems to receive the funding for just one borrower’s application. To differentiate from competitors, lenders should consider what technology could assist in streamlining and accelerating the process, resulting in a faster clear-to-close rate and satisfied borrowers. This level of exceptional service will strengthen relationships with borrowers as well as attract new ones. Not to mention, the addition of technology that injects speed and efficiencies into the lending process will empower loan officers to manage pipelines more effectively.

The housing market and recent trends are telling us that the time is right for both borrowers and lenders to tap home equity lending. With technology that can competitively position local lenders to stand out among the competition, home equity loans can be a powerful tool to help lenders ensure they can meet a growing need and remain profitable at the same time.