Homeowners are 'suffering' from what the Urban Institute calls the 'I hate my house, but I love my mortgage' syndrome.
A homeowner might ideally want to buy another house with different features, but either can't afford a higher mortgage rate or doesn't want to give up their 3% bargain.
Maybe back in the day, these folks would do a cash-out refinance. But that would be nuts right now — you'd wind up paying a higher mortgage rate. Enter the home equity line of credit , which lets homeowners borrow some amount of money — less than the value of the whole house, as with a refiTo put it in fancier parlance, "Borrowers can preserve the low rate on their first mortgage while tapping equity to meet cash needs," write the authors of the Urban Institute report.Because banks tend to hold HELOCs on their balance sheets rather than sell them, borrowers need very high credit scores to qualify.
With consumers looking to consolidate high-interest credit card debt, and lenders looking to gin up business in the wake of the lackluster first mortgage market, "HELOCs will likely remain a popular option in 2023," said Andy Walden, VP of enterprise research at Black Knight.
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