If You Own A Home, Don't Carry Consumer Debt
Hello to our community,
This week we wanted to take a minute to talk about something we all love to talk about, DEBT. Ok ok, I know that none of us actually like to talk about it. BUT if you hang out with us until the end, you'll hear some really great ideas on how you could reallocate some funds and potentially alleviate a lot of stress.
Did you know that around 77% of Americans have some form of debt? According to Experian, the average credit card balance was approximately $6,500 at the end of last year. In fact, our partner lenders have seen clients with more than $100,000 in credit card debt. If you're a homeowner and find yourself in this situation, did you know that tapping into your home equity to pay off expensive consumer debt could be a great option for you?
Fintech provider, FirstClose, recently released it's findings from a national consumer survey that measured homeowners' level of awareness of the benefits of their home equity. It turns out, consumers don’t know all that much about leveraging home equity debt versus other kinds of consumer debt. The survey also identified some misconceptions about home equity products. Nearly 40% did not know the difference between a closed-end home equity loan and a HELOC. Also, 37% of respondents mistakenly believed that if they took out a HELOC, they would be giving up their historically low mortgage interest rate.
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"The findings of this survey underscore the critical gap in consumers' understanding of the financial benefits of leveraging their equity," said CEO of FirstClose, Tedd Smith. "U.S. homeowners currently have more than $28 trillion in tappable home equity that could be used to pay down debt, which now has topped $1.14 trillion. If a consumer with an average [consumer debt] balance of $6,500 made only the minimum payment it would take 13 years and cost roughly $11,800 to pay off the debt completely."
The survey also gauged consumers’ willingness to tap into home equity. About 40% of respondents believe they have more than $200,000 worth of equity in their homes. When asked if they would access their home's equity to pay off debt, the responses were almost evenly split with 49% responding yes and 51% responding no. More than half of respondents (56%) said they would access the equity in their homes for a home renovation project. But, only 34% of respondents said they would access their equity to finance a big purchase, such as a car, a trip, and tuition, among other things.
Now that you've taken that all in, take a moment and think about whether or not it makes sense to do anything with the equity in your home. If the answer is yes, we'd love to get you in touch with a lender, banker, credit union that can help. More often than not, we just need someone to help guide us to our best options.
We hope this was helpful and that you're all having some summer fun out there!
Talk soon,
Amy, Kristine and Margo - The Place Portland Team