Spring is around the corner, and for many homeowners, it’s time to shake off the winter doldrums and freshen up the home. Often, this means tackling a major remodeling project – possibly a new bathroom, updated kitchen or that dream landscaping project. As the economy remains strong, the appetite for remodeling is growing quickly. The Joint Center for Housing Studies of Harvard University’s Leading Indicator of Remodeling Activity (LIRA) projects that homeowner spending on improvements and repairs will approach $340 billion in 2018, an increase of 7.5 percent from estimated 2017 spending.
What does this mean for lenders? One of the most affordable sources of funding for major remodeling projects is a Home Equity Line of Credit (HELOC), but according to a recent survey from TD Bank, the majority of homeowners have never heard of a HELOC.
As we’ve explored in the two previous blogs in this series, HELOC lending offers great revenue opportunities, and innovative trends in electronic documents provide modern tools to running an efficient program.
To make the most out of a HELOC program, lenders should educate their customers on the best uses of the capital. Providing timely information on the benefits of using a HELOC to fund a remodeling project can also be a great marketing tool to help grow the business line and offer your customers a more affordable option to fund the work.
Marketing the Best Uses of a HELOC
Two of the long-standing benefits of a HELOC were the combination of low interest rates and the benefits of deducting the interest from taxes. This provided an incentive to use the funds from a HELOC to pay for a wide variety of major expenses – remodeling, credit card debt, and medical bills and even vacations were common uses.
The new 2018 tax law, however, restricts the tax deduction on the HELOC to only those uses of capital that improve the property that the loan is drawn on. While other uses of the funds are not banned, consumers cannot deduct the interest costs from their Federal taxes.
For that reason, lenders should focus most of their attention to marketing HELOCs to those consumers looking to remodel or repair their home. Outside of the common kitchen and bathroom updates, here are a few trends in remodeling from Improvenet that can help lenders better target and identify potential HELOC customers:
As the largest generation ages, more attention is being paid to Baby Boomers’ accessibility needs. Accessibility projects include widening hallways and doors, as well as installing ramps and bathroom updates to make homes safer for aging homeowners.
A focus on eco-friendly remodeling continues to be a strong trend. These projects can range from simple updates to insulation and appliances to complex additions of solar panels or home automation features.
The final trend in remodeling is to embrace luxury upgrades. Enhancing the comfort and luxury of a home is one primary way of helping a home stand out from its neighbors. Particular rooms that draw luxury upgrades include master suites, mudrooms and basements.
Don’t lose the opportunity to help your customers examine ways to remodel their home. If they want to improve their home, be the first to offer a customer-oriented HELOC, completely supported by electronic paperwork to make the process easy and painless. Otherwise, they will turn to other options – credit cards or personal loans – to make the upgrades they seek.