Everything You Need to Know to Reboot Your Home Equity Offerings to Meet the Demand Surge
Last week, Doma was featured on National Mortgage News covering home equity and what lenders need to know to reboot their home equity offerings to meet the demand surge.
The average homeowner has $153,000 in home equity. To give a sense of how this stacks up, national credit card debt is $860B, student loan debt is $1.6T, and household debt is $15.6T—while the amount of home equity totals a staggering $27.8T. This is the largest it has ever been in the history of our country.
Who’s tapping into their home equity?
The average home equity borrower has lived in their home for 17 years, is 54 years old, and their average HELOC is $75,000. This is an important consideration when you think about how best to segment and market to your target customer base. The majority of these borrowers are using the funds to renovate their home. And, more than 65% of borrowers are shopping for other alternatives including credit cards, cash advances, and personal loans.
When comparing these alternatives, the average HELOC interest rate is around 6% as of August 2022, the average credit card rate is 15%, cash advances are 18-30%, and personal loans are 9-22% depending on credit score. While HELOCs have the best rate, the experience does not always match compared to the experience consumers are accustomed to. For example, at Target’s checkout counter, you can sign up for a new credit card within five minutes. Whereas a HELOC takes an average of 36 days to get the funds. Not only is it a lengthy wait time, it can be a cumbersome application process with little visibility into the status.
It’s better to have more connection points as customers sighted their top pain point to obtaining a HELOC was lack of customer service. Providing access through multiple channels helps alleviate this pain point. In fact, the CSAT for borrowers who got a HELOC entirely online was 819 on a 1,000 point scale, versus 864 when the customer used digital and in-person channels.
The landscape is evolving to meet these new consumer demands
Traditionally, home equity products were offered by banks and credit unions. Now non-bank lenders, like Rocket Mortgage, Guaranteed Rate and LoanDepot, are entering the market with offerings that are fully digital and come with commitments to close on time. In parallel, a new entrant called Home Equity Investment companies like Point, Hometap, and Splitero, provide a new model of disbursing funds to borrowers in exchange for a share of their home, are shaking up the market. As a result, consumers are demanding near instant experiences with equity delivered fast, a seamless digital experience, and lower fees–all this on top of the expectation for concierge-level service.
How can lenders reboot their home equity offerings and win in this market?
First, find opportunities to cross train current staff. Ensure your team knows the target market, the pain points, and what the consumer’s alternatives are so they can recommend the right loan product. Second, re-engineer the borrower experience by reviewing current touch points across all channels and make it an optimal experience, then consistently measure it through surveys. Third, and finally, streamline your operations by leveraging instant underwriting, utilizing RON where available, and tracking your vendors’ performance.
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Missed the webinar?
Check out the full recording here and find out how Doma can help you streamline your home equity business.
* Sources for home equity data points referenced in this article: CoreLogic, HMDA, J.D. Power