TD Bank Survey Finds Consumers Leverage HELOCs for Expenses Beyond Home Improvements

Majority of Americans report the value of their home has increased within the past few years, offering homeowners more equity to borrow

Nov 17, 2014, 08:30 ET from TD Bank

CHERRY HILL, N.J., Nov. 17, 2014 /PRNewswire/ -- Research from the TD Bank, America's Most Convenient Bank®, inaugural Consumer Borrowing Index found that while half of consumers who currently have a Home Equity Line of Credit (HELOC) acquired the loan primarily for home renovations, other needs served as significant motivators. Debt consolidation (29 percent), major home purchases (24 percent), emergency funds (19 percent) and education costs (20 percent) were among the other top responses.

TD Bank's inaugural Consumer Borrowing Index surveyed more than 1,350 U.S. homeowners with a HELOC to provide insights into borrowers' motivation, usage and perceptions of the loan.

The Index also found that consumers are often using HELOC funds for expenses beyond those originally intended. For instance:

  • While 24 percent of HELOC borrowers used the loan for emergencies, a smaller 19 percent actually anticipated using it that way
  • Twenty-seven percent purchased a new vehicle, while only 21 percent reported they intended to use the loan for this reason
  • Although 18 percent of borrowers used their HELOC for medical and healthcare expenses, a slightly smaller 14 percent had actually anticipated using the loan for this reason.

"We're seeing an increasing interest in HELOCs this year, suggesting a rebound in consumer confidence related to rising home values," said Michael Kinane, Head of Mortgage and Consumer Lending Products, TD Bank. "Using this type of financing to add value to your property is a strategic move when it comes to today's real estate market. HELOCs currently offer consumers the convenience and flexibility to borrow what they need at a better interest rate than most other lines of credit."

Borrowers Take Advantage of Increasing Home Values
A HELOC is secured by a consumer's home and typically requires 80 percent equity. According to the Index, 53 percent of homeowners report the value of their home has increased within the past few years, meaning consumers have more equity in their homes to borrow.

The survey revealed that 30 percent of homeowners are applying for a HELOC of $100,000 or more; however, the average loan secured is only $87,000. Those who shopped around tended to get a higher value loan. Additionally, individuals who went with their primary financial institution but did consider other lenders secured an average HELOC of $92,000, or $5,000 more than those who only considered their primary financial institution.  

What You Don't Know Will Cost You
Despite the popularity of HELOCs, there is still uncertainty and misunderstanding among many homeowners regarding the terms and conditions of their loan. Nearly half (47 percent) of consumers are paying some form of HELOC fee, such as an annual fee (30 percent), origination fee (30 percent) or prepayment fee (15 percent). However, one in five homeowners are unsure if they are paying fees. In addition, half of those surveyed do not know if they have any fixed-rate opportunities during their draw period, which on average is between five and 10 years.

The Index also found that consumers have misconceptions about interest rates associated with HELOCs. For instance, a majority (59 percent) of Millennials surveyed think that a HELOC interest rate is higher than interest rates for a student loan and 43 percent believe HELOC rates are higher than credit card interest rates.

Industry experts report that the average credit card rate nationally is 13.02 percent fixed and 15.72 percent variable, and student loans are expected to rise to 4.66 percent for the 2014-2015 school year. TD Bank's HELOC rate today is listed as low as 2.75 percent, which also includes a .25% discount for TD customers who have a checking account. Knowing that HELOCs often offer lower interest rates than these products can help borrowers find a loan that provides the best value.

Concerns about Repayments are Relative to Age
The TD Bank Consumer Borrowing Index found that 22 percent of borrowers nationally are either very or extremely concerned about their ability to meet payments at the end of the draw period. However, there are significant differences in the level of concern across generations. For instance, 73 percent of Millennials are extremely or very concerned about repayment, while 30 percent of Gen-Xers and only 8 percent of Baby Boomers are extremely or very concerned.

"The majority of homeowners surveyed feel the repayment requirements are manageable," said Kinane. "But it is important for consumers thinking about applying or who currently have a HELOC to focus on using the funds only on what they really need and prioritizing repayment when the time comes."

Survey Methodology
From October 7, 2014 to October 15, 2014 an online survey was conducted by Vision Critical's Financial Service Practice among 1,364 randomly selected American who currently own their own home and have a Home Equity Line of Credit product. The margin of error—which measures sampling variability — is +/- 2.7%. The results have been statistically weighted according to the most current data on age, gender, income, region and ethnicity to reflect the population from the American Community Survey, to ensure the sample is representative of the entire adult population of America. Discrepancies in or between totals are due to rounding.

About Vision Critical
Vision Critical provides a cloud-based customer intelligence platform that helps companies build engaged, secure communities of customers they can use continuously, across the enterprise, for ongoing, real-time feedback and insight.

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 approximately 1,300 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 Find TD Bank on Facebook at and on Twitter at

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