ORLANDO, FL—While a majority of homeowners see good value in borrowing against the equity they have in their homes, a new survey has found that they also tend to believe the step should be taken only in case of an emergency.
Even among those owners who already have a home equity loan, nearly two-thirds told pollsters that borrowing against their nest is an emergency-only situation. And one in four—as opposed to six in 10 owners in general—said the idea of an equity-based loan makes them uncomfortable.
“People are open” to home equity loans, said Kerri Ryan of Ipsos Marketing, which surveyed 1,000 homeowners last month on behalf of the Consumer Bankers Association. “But they are cautious.”
The survey, which was released at CBA Live 2011 here, was developed by the group’s Home Equity Committee to determine if equity lending is still relevant in today’s downtrodden housing market, and if so, what would they use such loans for and what impacts their decision-making process.
Ipsos found that a quarter of the thousand owners polled figure they’ll need to borrow money sometime in the next five years, mostly for a new automobile, home improvements or to pay for someone’s education. About half of those said they would consider equity-based products to cover those expenses, but they’d also consider other lending options as well.
The survey also found that customers would look to their primary bank for information about their loan options, but a healthy minority also would check with another institution where they have an account. And 16% said they’d talk, too, with a lender with which they have no financial ties.
However, younger borrowers—those owners who are in the 18- to 29-year-old age bracket—are more likely to rely on family and friends for information than their older peers. That finding, said Ryan, dovetails with the notion that younger people are “community decision makers” and shows how important it is for lenders to take part in social media.
These owners said they would probably apply for a loan with their primary bank. “They’re yours to lose,” Ryan told a conference session. But again, the younger ones would tend to visit the bank’s website for information. “The website is crucial for younger borrowers,” the Ipsos executive said.
Another key finding: While cost in terms of the interest rate, fees and monthly payment are huge, the reputation of the lender is almost as important. At the bottom of the things owners now consider: The quickest time to closing, a “complete reversal,” said Ryan, from just a few years ago when home equity lenders were “throwing money out the window” at would-be borrowers.
