The popularity of home equity lending continues to grow. In 2004, the number of home equity lines of credit (HELOCs) funded increased by 29% over the previous year for federally-insured credit unions. 1 Credit unions can further stimulate this growth by offering lending program expansions beyond traditional purposes to meet member needs. Three areas to consider for market expansion include:
Tuition: The cost for one year of private college averages $20,082, making education already a common use for home equity funds. 2 However, non-traditional students or older adults can also experience the benefits of a full college or graduate education, specialized training courses, or even continuing education classes. In addition, while many educational institutions offer financing options, the interest payments for a HELOC may be tax-deductible.
Home Improvement: A homeowner spends an average of $12,427 on the typical home improvement project, making this a significant cost for which your members will potentially not have enough disposable income to cover. 3 In the next five years, 42% of homeowners plan on starting a home improvement project. 3 However, improvements don’t need to be confined to the house – a new garage, purchase of an adjacent lot, or even improved landscaping are all ideas that help stretch the traditional home improvement concept.
Leisure Activities: The cost of vacations already makes them an attractive purpose for home equity lending, but a traditional retreat can become exceptional with additional funds. Members can trade up their hotel room for a rented cabin or spend a summer on the lake with a new boat. Additionally, other recreational activities, sports, and hobbies can also serve as potential uses of funds. Members can consider purchasing skis, scuba gear, or even new bicycles for the whole family all under the flexibility of a credit union home equity line of credit.
Old Republic Insured Credit Services (ORICS) specializes in providing innovative loss protection solutions for home equity lending institutions through credit indemnity policies underwritten by Old Republic Insurance Company. For over fifty years, ORICS has helped credit unions and other financial institutions manage their loss due to the risk of default and expand their home equity loan programs to meet member needs. For more information, call 800.621.7873 or visit the ORICS website at www.oldrepublicics.com.
1 NCUA Letter to Credit Unions: Managing Risks Associated with Home Equity Lending. (May 2005) http://www.ncua.gov/letters/2005/CU/05-CU-07.pdf
2 2004-2005 College Costs. http://www.collegeboard.com/article/0,3868,6-29-0-4494,00.html
3 American Homeowners’ Wish List. (2005) http://www.bhg.com/bhg/story.jhtml?storyid=/templatedata/bhg/story/data/BHBL_Survey_01112005.xml