CHARLOTTE, N.C.–A new study recently found that most first-time homebuyers are unaware of the potential uses of a home equity line of credit.
The study, sponsored by Bank of America, found that 36% of first-time homebuyers wouldn’t open a HELC because of a lack of understanding as to how the product works. Of those that would, the disparity on what they would use it for is evident between experienced homebuyers and first-time homebuyers, the survey found.
Home improvements were the most popular use of HELCs, with 58% of all homeowners identifying it as the most likely use of home equity funds. Thirty-five percent said they used a HELOC to consolidate their debt, and only 11% said they would use it for emergency funds. Of those who responded to the survey, 10% of homeowners said they have yet to tap into their home equity line of credit.
Among the other findings:
- Between experienced buyers and first-time buyers, 92% said home improvements was their goal, compared to 81%, respectively.
- Eighty-one percent of experienced buyers said they would use their HELOC to consolidate debt, while only 62% of first-time buyers would take out credit on their home to do the same.
- Only 61% of first-time homebuyers would use a HELOC for emergency funds, as opposed to 77% of experienced homeowners. Education expenses amounted to 74% for experienced buyers, and only 56% of first-time homebuyers.
- When considering what type of home to buy, first-time homebuyers were more willing to consider a home that they could fix up themselves. Seventeen percent of first-time homebuyers said they wanted a home they could make major renovations to, as opposed to 10% of people who had already owned at least one home.
- 39% of first-time homebuyers said they wanted a house that they could make small cosmetic changes to. Experienced homebuyers were almost equally as willing to settle for a house with small changes, at 31%.