CHERRY HILL, N.J., Oct. 18, 2016 /PRNewswire/ -- Over the next
few years (2015 to 2018), a larger number of U.S. homeowners (43
percent) will be affected by a Home Equity Lines of Credit (HELOC)
reset, and many appear unprepared, according to a new study
released by TD Bank, America's Most Convenient Bank®. The HELOC
Reset Measure polled more than 800 homeowners who hold HELOCs, and
also revealed that 23 percent of respondents do not have financial
plans in place to handle the end of their draw periods.
During the housing boom, many homeowners borrowed HELOCs to
finance expenses such as home renovations, medical bills and
college tuition. With home values soaring, homeowners found HELOCs
to be a convenient way to borrow or consolidate debt.
"Many HELOCs allow borrowers to draw for 10 years and make
interest- only payments," said Mike
Kinane, Senior Vice President, Home Equity, TD Bank. "When
this draw period ends, borrowers are required to pay principal and
interest, which may increase their monthly payments. It's important
that HELOC borrowers plan ahead and review their contract to
determine the best course of action based on their current and
future financial situations."
Repayment Misconceptions Exist Among HELOC Borrowers
Many HELOC borrowers are unaware of their HELOC reset date
described in their contract, despite communications from
lenders.
- Only 19 percent of respondents understand that a HELOC reset
will increase their monthly payments.
- More than one-third (34 percent) of respondents believe their
monthly payment will be reduced when their HELOC resets.
- A majority of respondents (60 percent) who do not have a plan
for their HELOC resets, indicated that they won't seek guidance
from their lenders.
"If borrowers do not have a financial plan for the end of their
draw period they should contact their lender as early as possible,"
says Kinane. "A responsive lender will offer multiple ways for you
to pay down your line of credit."
Why Borrowers Sought HELOC Loans over the last decade
- The top three reasons respondents opened a HELOC were to
renovate a home (38 percent), consolidate debt (24 percent) and
purchase a new vehicle (20 percent).
- A majority of respondents (64 percent) took out a HELOC loan
for more than $50,000.
- One-third of borrowers who opened HELOCs prior to 2011 are
unaware of their draw period expiration date described in the HELOC
contract; this number rises among Baby Boomers (42 percent).
- More than half (53 percent) of respondents who opened HELOCs
between 2005 and 2008 don't know the impact the reset will have on
their monthly payments.
Prepared Borrowers Plan to Refinance and Find New Uses for
HELOCs
- More than one quarter of respondents plan to refinance their
HELOC into another loan, and almost 70 percent of those borrowers
plan to approach their current lenders.
- For those respondents considering a refinance, using a HELOC
for emergency funds was most important (35 percent), followed by
home renovation (27 percent) and travel (26 percent).
- On average, Millennials report a broader range of reasons to
get HELOCs than their older counterparts (Gen Next and Baby
Boomers), including travel/vacations, home renovations and
emergency funds.
"HELOCs can be a smart and flexible way for consumers to make
home renovations, consolidate debt, pay for education, or deal with
unexpected expenses," said Kinane. "It's a wise idea to consult
with your banker, and take advantage of the benefits that HELOCs
can offer. TD is invested in making the entire borrowing process a
positive experience; it's a part of what makes us the human
bank."
Survey Methodology
This survey polled a nationally representative sample of homeowners
who currently have HELOCs. The online fieldwork was conducted
between Aug.t 29 and Sept.
5th, 2016. In total, 812 completed surveys were
included in the results. Data has been weighted by age, gender, and
region to reflect the HELOC population. Margin of Error is +/-3.6
percent.
About MARU
MARU/VCR&C is a professional services firm dedicated to
improving its client's business outcomes. We deliver our services
through teams of sector-specific research consultants that have
technology in their DNA, specializing in the use of Insight
Community and Voice of Market technology.
About TD Bank, America's Most Convenient
Bank®
TD Bank, America's Most Convenient Bank, is one of the 10 largest
banks in the U.S., providing more than 8 million customers with a
full range of retail, small business and commercial banking
products and services at more than 1,200 convenient locations
throughout the Northeast, Mid-Atlantic, Metro D.C., the Carolinas
and Florida. In addition, TD Bank
and its subsidiaries offer customized private banking and wealth
management services through TD Wealth®, and vehicle financing and
dealer commercial services through TD Auto Finance. TD Bank is
headquartered in Cherry Hill, N.J.
To learn more, visit www.tdbank.com. Find TD Bank on Facebook at
www.facebook.com/TDBank and on Twitter at
www.twitter.com/TDBank_US.
TD Bank, America's Most Convenient Bank, is a member of TD Bank
Group and a subsidiary of The Toronto-Dominion Bank of Toronto, Canada, a top 10 financial services
company in North America. The
Toronto-Dominion Bank trades on the New
York and Toronto stock
exchanges under the ticker symbol "TD". To learn more, visit
www.td.com.
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SOURCE TD Bank