Record-Breaking Interest in Home Equity Line of Credits Among Americans Indicate Rising Fear of Recession

A recent study released by RubyHome indicates that Americans are searching the internet for the term HELOC, short for Home Equity Line of Credit, at the highest rate in internet history. This new data comes off the tail of U.S. housing mortgage rates rising dramatically and the latest announcement by the Federal Reserve approving another quarter percent interest rate hike. Americans are taking steps to free up capital as they brace for a possible recession.

The analysis of Google search data conducted by RubyHome indicates that this July saw a 305% increase in searches for HELOCs, which reflects the highest level of searches for this term in the history of the internet. With a national interest rate of 5.5%, Americans are holding their breath for what’s to come next. 

“I would say it’s certainly possible that we will raise funds again at the September meeting if the data warranted,” says Federal Reserve Chairman Jerome Powell. “And I would also say it’s possible that we would choose to hold steady, and we’re going to be making careful assessments, as I said, meeting by meeting.”

What is a Home Equity Line of Credit (HELOC)

A Home Equity Line of Credit (HELOC) is secured credit borrowed against the equity you’ve built in your home. When you pursue a HELOC, you are using your home as collateral to ensure the debt is repaid in a timely manner. When establishing a HELOC, you benefit from a draw period (typically around ten years) where you can continue to pay back and pull from that credit pot as needed, like a credit card. Borrowers only pay interest on the funds spent.

Some individuals choose to use their HELOC for home improvement projects or renovations, while others consolidate debt from lenders with higher interest rates. However, this is only some of what you can use a HELOC for. Many choose to use HELOCs for significant life events like weddings, education tuition, or to cover the cost of having children. Where HELOCs are especially helpful during times of unexpected financial hardships.

In the property world, HELOCs are an excellent option for homeowners looking for additional space but who need help to afford a new mortgage at these historically high mortgage rates. Securing a HELOC allows borrowers to make upgrades they need to continue to live in their homes without sacrificing their lower fixed mortgage rate. Once the agreed-upon draw period ends, the borrower’s repayment period begins, typically consisting of 10 to 20 years of scheduled repayments. 

Qualifying for a HELOC requires the standard due diligence that most loans or credit options do: a credit check, credit history review, proof of income and employment history, etc. In this instance, your home must be worth more than you owe on the remaining mortgage. HELOCs are available up to 85% of home value minus the remaining mortgage. 

Home Owners in These States Are Most Interested in HELOCs

By disaggregating the data by state, researchers at RubyHome confirm the top ten states where Google searches for Home Equity Line of Credits are highest. From the highest search volume down, these states are Hawaii, Utah, Colorado, Washington, Idaho, Tennessee, California, Arizona, Nevada, and Florida. 

Tony Mariotti, CEO of RubyHome, shares his thoughts on the findings, “Homeowners that bought a few years ago, at lower prices and lower interest rates, can feel trapped. If they’ve considered buying a new home, they’ve looked around at today’s higher home prices and know they can never replace the historically low-interest rate they have now. Even though home equity loans carry a higher rate, a small loan for home improvement still works in their favor – the blended rate of the HELOC with their first mortgage is still below market rates for a new first mortgage.”

If you are curious about exploring Home Equity Line of Credits for your property, shopping around financial institutions could help you to secure a competitive rate. The experts at FORBES recommend you first check the rates at your current financial institution and explore options from there that better align with your needs. Make a note of any costs, additional fees, or penalties while shopping, and confirm with lenders that require balloon repayments instead of scheduled installments. 

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Rachael Westgate is a skilled writer specializing in political and economic journalism, often employing the Associated Press (AP) style in her work. Her articles are known for their clarity, precision, and adherence to the highest journalistic standards.