Survey Finds Millennials Forge Their Own Path in Utilizing Home Equity
Mar 30, 2023
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The survey, conducted by Discover Home Equity Loans, found that nearly half of millennial homeowners who have tapped into their home equity did so to consolidate debt, compared to just 26% of Gen X homeowners and 18% of baby boomers. This suggests that millennials are prioritizing financial security over home improvement projects, which has been a common use of home equity in the past.
The survey also found that millennials are more likely to use their home equity to fund non-housing related expenses, such as education costs or starting a business. Over a third of millennial homeowners who have tapped into their home equity used the funds for education expenses, compared to just 11% of Gen X homeowners and 4% of baby boomers. Additionally, 23% of millennial homeowners used their home equity to start a business, compared to just 8% of Gen X homeowners and 3% of baby boomers.
These findings suggest that millennials are taking advantage of the flexibility that home equity loans and lines of credit can provide, using the funds to pursue a wider range of financial goals. While home equity has traditionally been seen as a tool for funding home improvements or other housing-related expenses, millennials are using it to support their overall financial wellbeing and long-term goals.
Another factor that may be contributing to this shift is the fact that millennials are more likely to have substantial home equity at a younger age compared to previous generations. According to the survey, nearly half of millennial homeowners have more than $100,000 in home equity, which could be providing them with more financial flexibility and opportunities.
However, it's important for millennials to be cautious when using their home equity. While using home equity to consolidate debt or fund education can be a smart financial move, it's important to remember that home equity loans and lines of credit are secured loans, meaning that the borrower's home is used as collateral. Defaulting on a home equity loan or line of credit can result in foreclosure, so it's important to carefully consider whether using home equity is the right choice for your financial situation.
Overall, the survey suggests that millennials are forging their own path when it comes to utilizing home equity. Rather than following in the footsteps of previous generations, they are using home equity to pursue a wider range of financial goals, prioritizing financial security and flexibility over traditional home improvement projects. As more millennials become homeowners and build up home equity, it will be interesting to see how they continue to use this financial tool to support their long-term financial goals.
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1. Qualified applicants may borrow up to 95% of their home’s value. This does not apply to investment properties.
2. HELOCs have a 10-year draw period. During the draw period, the borrower is required to make monthly minimum payments, which will equal the greater of (a) $100; or (b) the total of all accrued finance charges and other charges for the monthly billing cycle. During the draw period, the monthly minimum payments may not reduce the outstanding principal balance. During the repayment period, the borrower is required to make monthly minimum payments, which will equal the greater of (a) $100; or (b) 1/240th of the outstanding balance at the end of the draw period, plus all accrued finance charges and other fees, charges, and costs.The lender will calculate this amount by taking the outstanding Account Balance on the last day of the draw period and dividing it by 240 months and then adding any finance charge that accrues but remains unpaid during the monthly billing cycle plus any other fees, charges and costs to the fixed principal payment that is due. During the repayment period, the monthly minimum payments may not, to the extent permitted by law, fully repay the principal balance outstanding on the HELOC. At the end of the repayment period, the borrower must pay any remaining outstanding balance in one full payment.
3. The time it takes to get cash is measured from the time the Lending Partner receives all documents requested from the applicant and assumes the applicant’s stated income, property and title information provided in the loan application matches the requested documents and any supporting information. Most borrowers get their cash on average in 21 days. The time period calculation to get cash is based on the first 4 months of 2024 loan funding's, assumes the funds are wired, excludes weekends, and excludes the government-mandated disclosure waiting period. The amount of time it takes to get cash will vary depending on the applicant’s respective financial circumstances and the Lending Partner’s current volume of applications. Closing costs can vary from 3.0 - 5.0%. An appraisal may be required to be completed on the property in some instances.
4. Not all borrowers will meet the requirements necessary to qualify. Rates and terms are subject to change based on market conditions and borrower eligibility. This offer is subject to verification of borrower qualifications, property evaluations, income verification and credit approval. This is not a commitment to lend.
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