Nearly 30% of Homeowners Considering Home Equity Loans, MeridianLink Finds

(Charts courtesy of MeridianLink. Stock cover illustration courtesy of Rich Howard/pexels.com)

Nearly three in 10 American homeowners are considering taking out a home equity loan or HELOC in the next 12 months, according to a new survey from MeridianLink, Costa Mesa, Calif.

The figure is up a notable 7% compared to 2022, reflecting a shift in consumer sentiment despite lingering concerns about affordability, repayment risks and knowledge gaps, MeridianLink noted.

“Homeowners recognize the potential of home equity lending, but many are still on the sidelines due to financial uncertainty and lack of education about their options,” MeridianLink Senior Vice President of Mortgage JP Kelly said. “This presents an opportunity for financial institutions to bridge the gap by simplifying the lending application process, improving education on home equity products and offering more competitive, flexible options.”

MeridianLink surveyed nearly 1,500 homeowners to build on its 2022 home equity trends survey. In 2022, just 21% of respondents said they were likely to take out a home equity loan, showing consumers are growing increasingly likely to leverage these products.

But affordability is a major concern for the 54% of homeowners that remain hesitant to home equity lending, with high interest rates (63%), worries about risking homeownership (22%) and uncertainty about repayment terms (18%) deterring potential borrowers.

Other key survey findings include:

Home improvement remains the top motivator. Among those likely to borrow, 45% cited home renovations as their primary reason, followed by investing in new properties (16%) and debt consolidation (16%).

A lender’s reputation plays a crucial role in borrower decision-making. While interest rates remain important, 43% of homeowners cited trust and reputation as key factors in choosing a lender. Borrowers are looking for institutions that not only offer competitive rates but also provide a seamless, transparent, and reliable lending experience.

Understanding of home equity lending is improving, but gaps remain. More than half (53%) of homeowners rated their understanding of home equity lending as strong, an improvement from 43% in 2022. However, 23% admitted to an incomplete understanding of these products, indicative of the need for continued education.

Financial institutions can look to boost adoption by simplifying the process and offering flexibility. Lower interest rates (68%), more flexible repayment options (36%) and an easier application process (18%) were identified as the top factors that would increase the likelihood to borrow.