Many homeowners today are locked into mortgages with low interest rates that incentivize them to stay in their homes. Many have also benefited from rising appreciation with the equity in their homes increasing oftentimes significantly.
This increase in equity affords homeowners the ability to secure attractive financing for any large expenditure, such as taking out a home equity line of credit (HELOC). Homeowners can get attractive interest rates and lower payment terms with HELOCs compared to alternatives such as personal loans, while also maintaining their low mortgage rates.
Introducing homeowners to HELOCs is not just about offering a financial product, it’s about providing a valuable service. As an originator, you have the opportunity to guide your clients through this process by offering advice that promotes consumer loyalty and strengthens your relationship with the borrower.
“As an originator, you have the opportunity to guide your clients through this process by offering advice that promotes consumer loyalty and strengthens your relationship with the borrower.”
One of the most common uses for HELOCs is to renovate a home. The changing needs of today’s families often fuel the demand for an updated home design. Factors like growing families, the persistence of remote work, a focus on energy efficient upgrades and a desire to age in place lead many families to consider remodeling projects.
In fact, according to a recent survey conducted by Figure Technology Solutions, 47% of respondents used their HELOC for home improvement. HELOCs allow homeowners to tap into the equity in their homes to cover remodeling needs and other expenses, all while potentially increasing the value of their property.
Home remodeling can be a significant financial undertaking, and not everyone has the immediate cash to cover the costs. This is where a HELOC can provide a sense of financial security.
Build loyalty
For originators, staying informed about the market, remodeling needs and other common homeowner pain points is crucial. This knowledge positions them to help past clients meet their financial goals effectively. By providing accurate and up-to-date advice, advisers can increase loyalty and open doors for refinancing opportunities when rates drop.
Existing clients will appreciate an originator’s advice and guidance. As marketing conditions change and personal needs evolve, they will likely turn to originators for solutions. Originators will increase engagement with their client base to establish themselves as a fixture in their financial futures.
In addition, originators, by introducing and educating new clients about unlocking their home equity through HELOCs, have the potential to significantly expand their client base. This is not just about offering a financial product, it’s about connecting with homeowners while also cultivating relationships with other referral sources, from financial advisers to contractors, focused on helping these consumers achieve their financial and personal dreams.
To offer the best service, originators must research various HELOCs to recommend one that best meets client needs. In today’s market, there are purpose-driven HELOC options that provide a streamlined process and a quick closing, for both originators and borrowers, as well as more traditional products. In addition to providing clients with a more efficient process, originators will earn commissions faster and offer more loans to clients to boost revenue.
Create awareness
Don’t assume that clients will just come to you asking for HELOCs. You need to consider educational marketing campaigns to reintroduce HELOCs to your communities and clients you serve. Start by boosting your familiarity with HELOC benefits. For instance, understand the differences between HELOCs and personal loans.
HELOCs offer lower interest rates than unsecured personal loans. Personal loans offer interest rates starting at 12%, while HELOC interest rates are 6%-15%. Credit cards are even worse, with interest rates between 15% to 30%. HELOCs also provide higher loan amounts and have longer terms, allowing for lower payments.
A cash-out refinance is one of the few loan types that offers lower interest rates than a HELOC. But it requires the homeowner to potentially lose a historically low first-mortgage interest rate and take on a much higher overall monthly debt payment.
HELOCs, on the other hand, allow you to keep your low first-mortgage interest rate and only take out the cash you need from your equity. Borrowers also may be able to deduct the interest paid on a HELOC if the funds are used for home renovations.
The homeowner should consult with a tax professional to learn more about this opportunity as it applies to their situation. HELOC payments are often relatively low, because they can be spread over 30 years, making them more affordable.
Multiple benefits
Originators should educate their past clients about the many benefits of HELOCs. For instance, the lower interest rates of HELOCS compared with other loans make them ideal for consolidating debt. This financing tool allows homeowners to tap into funds when needed. HELOCs typically enable the borrower to take multiple draws, repay and reuse their home equity when needed.
With more than 40% of Americans owning their homes outright, a HELOC can give homeowners a more flexible and faster alternative to cover large cash needs quickly. HELOCs are an excellent way to pay for remodeling, including solar and energy efficient upgrades, accessory dwelling units also known as ADUs, pool installation and other projects that could pay for themselves by increasing home values.
While most HELOC loans are purpose-driven, they do not need to be used just for home-related projects. You can use the funds for vacations, education, family planning, life events or even unexpected situations. HELOCs can unlock your home’s equity when you need cash.
Originators can drive commissions by informing existing and potential clients of the many uses of HELOCs. You can market this product by emailing your database, social media, videos, blogs, direct mail, and other marketing channels.
Marketing approaches
So how do you market HELOCs? There are several techniques. Good old-fashioned snail mail can advertise to homeowners in areas of rising home values and avoid the growing challenges of cold calling and texting new potential clients.
Partner with contractors, architects and designers, financial advisers, home goods suppliers, event planners, educational consultants, medical providers and others in your community that have clients in need of financing large expenses.
Most HELOC borrowers are Generation X. These consumers respond to inclusive ads featuring people with various cultural backgrounds. Mention the many ways a HELOC can be used. Home remodeling is the most common use. Debt consolidation, education, solar and energy efficient financing and business expansion are a few of the multitude of uses for home equity, however.
“Realize that borrower’s needs are seasonal. In your marketing, mention home improvement in the spring, tuition expenses in the summer, taxes in the fall and spring.”
Realize that borrowers’ needs are seasonal. In your marketing, mention home improvement in the spring, tuition expenses in the summer, taxes in the fall and spring. And everybody wants to start off the new year on the right foot so suggest that a HELOC could be used to pay off holiday debt in January.
Be straightforward in your marketing. Don’t try to cross-sell products in your HELOC ads. Use an approach that promotes transparency and avoids confusion.
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Many homeowners don’t realize they can utilize the equity in their homes to access more affordable rates. Don’t let your local bank or credit union take this competitive advantage from you by offering this classic relationship product.
Rising home prices have made home equity loans a more attractive option. With the right home equity product and marketing strategy, mortgage originators can drive client value and personal commissions. Use HELOCs to grow your business and build consumer loyalty as you help clients unlock a better life by unlocking their home equity.
