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Homeowners Take Home Equity to Use for Other Funds

Paying Money One BHThose among the older millennial generation (ages 30 to 34) who own a home are likely to tap into their home equity when they need extra cash, according to a survey from Discover Home Equity Loans.

In fact, that age cohort was twice as likely than baby boomers ages 55 to 64 to take out a home equity loan, according to the survey of 1,428 adults in March 2016 conducted by research firm Toluna for Discover.

A report from Realtor.com, though, says that they believe that looking at past data from the housing market, some homeowners who took money out of their homes ended up owing more than the homes were worth — leading to a rise in foreclosures and short sales.

“It mystifies me that they’re taking out additional debt,” said Jackson Mueller, deputy director of the FinTech Program for the Center for Financial Markets at the Milken Institute, a nonpartisan think tank that aims to increase global prosperity. “But it doesn’t really surprise me that they’re using alternative financing to fund certain things.”

The survey found that millennials prefer the cheaper home equity loan interest rate (which averaged 4.88 percent for the week ending August 17) or home equity line of credit rate (4.75 percent) over borrowing using a credit card, where the average interest rate is currently 16.1 percent.

“Homeowners who have built equity in their homes have the opportunity to leverage their financial asset to help them pay down debt, update their home or pay for major expenses,” said TJ Freeborn, director of operations strategy for Discover Home Equity Loans. “Home equity loans are a viable option homeowners may want to consider, especially because they offer perks like a fixed rate for the life of the loan and the potential for the interest to be tax deductible.”

Out of the 64 percent of older millennials who own a home, 51 percent of them used to have a home equity loan, compared to just 26 percent of baby boomers who own a home, according to the survey.

Older millennial homeowners were three times more likely than baby boomers to tap home equity when they need emergency cash (42 percent compared to 14 percent).

The survey also showed that older millennials were more likely than baby boomers to use their home as a financial asset by selling it to make money (27 percent compared to 13 percent) and older millennials were also more likely than baby boomers to view their homes as an investment property (25 percent compared to 7 percent).

Click here to view the full survey results.

About Author: Kendall Baer

Kendall Baer is a Baylor University graduate with a degree in news editorial journalism and a minor in marketing. She is fluent in both English and Italian, and studied abroad in Florence, Italy. Apart from her work as a journalist, she has also managed professional associations such as Association of Corporate Counsel, Commercial Real Estate Women, American Immigration Lawyers Association, and Project Management Institute for Association Management Consultants in Houston, Texas. Born and raised in Texas, Baer now works as the online editor for DS News.
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