CHERRY HILL, N.J., July 10, 2019 /PRNewswire/ -- Nearly half of homeowners (48 percent) plan to renovate their homes in the next two years, and a third of those homeowners expect to spend more than $50,000 on their renovations, according to recent research from TD Bank, America's Most Convenient Bank®.
TD Bank's Home Equity Trend Watch is a national survey of more than 1,800 homeowners which examines trends in home equity usage and home renovations. The findings reveal that while many homeowners are dipping into their savings (48 percent) and checking accounts (34 percent) to fund renovations, many are establishing substantial budgets and seeking financing options. A quarter (25 percent) say they will borrow through a home equity line of credit (HELOC), and a similar portion will utilize a personal credit card (24 percent) or a personal loan (18 percent).
"While there are many viable options for funding a renovation, a home equity line of credit is one of the most affordable ways to borrow," said Jon Giles, Head of Home Equity Lending at TD Bank. "During a HELOC's 10-year draw period, it functions much like a credit card, whereby you can draw funds when you need them. But while credit cards typically carry interest rates around 17 percent, a well-positioned borrower seeking a HELOC can secure rates close to the Federal Reserve's prime rate, which is currently around 5.5 percent. This also provides flexibility, as most homeowners won't want to draw on cash reserves or savings when unexpected expenses arise."
Hammering Out the Financing
As of late 2018, the average U.S. mortgage holder had more than $113,000 in equity in their home, which is calculated by subtracting their mortgage balance from the current, appraised value of their home. Yet much of that equity remains untapped. Just a third (36 percent) of survey respondents said they have had a home equity loan or HELOC.
"We've found that many homeowners simply aren't aware of how they can leverage the equity in their homes," said Giles. "Home equity financing is ideal for projects that will add value to one's home, such as a renovation. It's also frequently tapped to consolidate higher interest rate debt, or to help with education expenses. At TD, we are working to increase awareness and education so that more homeowners can take advantage of their home equity when they need it."
Indeed, the survey uncovered several gaps in understanding home equity:
Nearly a quarter (23 percent) of homeowners said they could not define a HELOC.
Almost a third (32 percent) of homeowners did not know the current equity in their home.
One in six (16 percent) homeowners did not understand the impact of fixed versus variable rates on monthly payments.
DIY or Buy? A Generational Divide
While a desire to undertake home renovations spanned all audience segments, key generational differences were observed in respondents' priorities and strategies for renovating.
More than half (54 percent) of baby boomers – those over age 55 – said appearance/quality of the final product was their top renovation priority, while 18-34 year-olds were more likely to prioritize cost first (43 percent). What's more, 27 percent of the youngest respondents indicated the speed of the renovation was their first priority, compared to zero boomers.
When it comes to tackling the renovations, 64 percent of respondents in the 18 to 34 age group said they would do some or all of the work themselves, indicating they are likely looking to save on labor costs. Meanwhile, 60 percent of boomers said they would hire professionals to carry out all of the work.
Across the board, homeowners said they are planning to renovate their bathroom (26 percent) and their kitchen (25 percent) more than any other area of their home. Nearly half (48 percent) said improving the quality of their outdoor space was a top reason to renovate.
Survey Methodology The study was conducted by research company Maru/Matchbox. Respondents were composed of a nationally representative sample of 1,801 American homeowners, with a margin of error of +/- 2.3 percent. The survey was fielded from April 2nd to 17th, 2019.
About MARU Maru/Matchbox is a professional services firm dedicated to improving its clients' business outcomes. It delivers its 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. Maru/Matchbox research drives decision-making across all aspects of customer experience, including innovation, product, branding, commercialization and communications.
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 9 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.td.com/us. 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/us.