But things have taken a turn, he suggested: “Really since rates started to rise in the early part of the year – and we saw a dramatic increase in March – that was really the turning point where we started to see rates starting to ramp higher, where the benefit for the consumer to do a traditional refinance cash-out transaction was no longer really there.”
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Fortunately, other financing options are available to consumers – including HELOCs. “The cost of a HELOC to a consumer is generally more than a traditional cash-out refinancing,” he said. “However, when rates rise, the consumer now is able to maintain their existing low interest rate mortgage – on the principal balance of their mortgage – and still tap into the equity of their home by leveraging that home equity line of credit target.”
There are two types of HELOCs offered, the traditional variety or a closed-end HELOC, Findlay said. Both target the same objective, he noted, which is to draw equity out of the home.
“It’s worked out pretty well,” Findlay said. “It’s recently come to bear because of what happened and how fast rates increased. It’s not just about that rates went higher, but about how fast they went higher in that short timeframe.”