2018 seems to be a tale of two stories: the rise of the home equity line of credit (HELOC) and the decline of refinances. Home equity levels have steadily risen throughout 2018 and are now closing in on $15 trillion, according to HousingWire. The Mortgage Bankers Association (MBA) recognizes homeowners have become less interested in refinancing in the current market because of continued mortgage rate increases. Instead borrowers are opting for HELOCs, as many homeowners who secured rates below 4.25% in the last five years seem reluctant lose the benefits of their current rates and terms.
This year, mortgage rates increased to nearly 5% as the Federal Reserve raised its benchmark rate three times. A fourth benchmark hike is projected to occur after the Fed’s next meeting on December 18, which could send mortgage rates higher for the start of 2019.
HELOCS Attract Borrowers with High LTV, Lower Rates, Longer Terms & Borrower Control
A HELOC allows borrowers to take 95% to 100% of the available equity they have already built with their current homes. The money from this loan product can be used for expenses such as home improvement projects, medical expenses, bill consolidation and college tuition. A HELOC can be an attractive loan for homeowners interested in securing low lump sum amounts (often less than $20,000) or borrowing smaller amounts over longer periods.
HELOCs are also attractive because they do not alter the current mortgage. Instead, a HELOC is a second mortgage that acts similarly to a credit card, letting a homeowner borrow small amounts of money on a fixed payment term on an adjustable rate. The length of a HELOC can vary, but if needed, the full loan term can last as long as 30 years.
Increase Pipeline Volume and Capitalize on HELOC Fever this Winter
Even with current trends, there is still a substantial number of prospective borrowers searching for refinance loans. To drive business, you need to be available to consumers seeking both HELOCs and cash-out refinance solutions. Here are three tips to help you best position your services as a resource for prospective clients:
1. Focus on growing your portfolio by offering multiple solutions to equity-seeking clients.
- Attract prospective borrowers who have intent to acquire tappable cash by positioning both cash-out and HELOCs as attainable solutions.
- Use content to market cash-out refinance programs and also highlight the opportunity to obtain cash via a HELOC.
- Segment your database by credit score, as homeowners with scores below 650 are less likely to be approved for HELOCs.
2. Remarket to potential equity-seeking clients during the holidays to aid their spending woes in the new year.
- According to Deloitte’s annual holiday sales forecast, holiday retail sales are expected to exceed $1.1 trillion this year. Holiday spending could mean more debt for many consumers.
- Market HELOCs and cash-out refinance loans to equity-seeking clients during December to create January demand for tappable cash options for borrowers who may need to consolidate debt.
3. Leverage social and email strategies to hit your database with digital touches.
- Organic social, paid social and email marketing strategies should drive traffic to pages on your website that position cash-out and HELOC as two possible solutions for cash-seeking clients.
- Consider developing specific paid social ads targeting consumers who may be considering personal loans. Drive their interest toward your website copy that explains and positions the benefits of HELOC programs in comparison to personal loans.
HELOC Clients Can Grow Your 2019 Pipeline
As an originator, you may be hesitant to invest in marketing efforts that promote HELOCs, because your ROI may be higher with cash-out refinance loans. Don’t underestimate the impact HELOC volume could have in your pipeline. Although the return on each individual loan is slightly lower, aligning your marketing messages with HELOC content can attract new prospects and deliver potential to grow into future business and referrals.
As you continue to collect data from new leads, you gain more opportunities to remarket and retarget in the future. A HELOC borrower in 2019 could become a purchase loan borrower in the future or refer you to your next purchase or refinance client.
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