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What is A Smarter Way to Finance Your Goals?
Accessing home equity used to be a slow and complex process. Today, that’s changing. Thanks to digital lending platforms, homeowners and investors can now tap into their equity faster and with less hassle.
Whether you’re planning home renovations, consolidating debt, or investing in new properties, tools like home equity lines of credit—commonly known as HELOCs—offer more flexible and efficient financing options than ever before.
HELOC vs. Cash-Out Refinance: What’s the Difference?
Both HELOCs and cash-out refinancing allow homeowners to access their equity, but they operate differently. Choosing the right one depends on your goals.
Keep your existing mortgage
A HELOC does not replace your current mortgage. If you already have a low interest rate, you can keep it while still accessing cash. In contrast, a cash-out refinance replaces your original mortgage with a new one at current rates, which may be higher.
Flexible access to funds
HELOCs offer revolving access to money—like a credit card. You borrow only what you need, when you need it, and only pay interest on the amount you use. A cash-out refinance gives you a lump sum upfront, and you start paying interest on the full amount from day one.
Lower upfront costs
HELOCs generally come with fewer closing costs and fees, making them a more affordable option. Cash-out refinances tend to involve higher fees, appraisals, and closing costs.
Faster approval and funding
With digital lenders, applying for a HELOC can be quick and convenient. Some platforms offer funding in as little as five days. Cash-out refinancing usually takes longer because of the additional steps involved.
When Is a Cash-Out Refinance the Better Option?
There are scenarios where refinancing might make more sense:
- You want to lower your mortgage rate
- You need a large lump sum immediately
- You prefer fixed payments over a credit line
Why More Borrowers Are Choosing HELOCs With Digital Lenders
New lenders are changing the way HELOCs work. One of the most popular is Figure, a top nonbank HELOC provider in the United States. Here’s why homeowners and investors are turning to digital lenders like Figure:
Fast and simple digital process
Forget mountains of paperwork. Figure’s online application process allows you to apply in minutes and potentially receive funding in just a few days.
Competitive fixed rates
Unlike many traditional HELOCs with variable rates, some digital lenders offer fixed-rate options. This gives borrowers more predictability with their payments, which is especially useful in uncertain economic times.
High borrowing limits
Some lenders offer borrowing limits up to four hundred thousand dollars. This is ideal for larger projects, real estate investments, or consolidating high-interest debt.
Tailored for real estate investors
For investors, HELOCs can be a quick way to access capital without selling property or applying for a new mortgage. They can be used to buy additional homes, fund renovations, or make improvements that boost rental income.
Clear and transparent terms
A quality HELOC should come with no hidden fees, no prepayment penalties, and no surprises. Look for lenders that clearly outline costs and make the borrowing process easy to understand.
Who Should Consider a HELOC?
HELOCs can be useful for a range of borrowers, including:
- Homeowners looking to renovate or handle large expenses
- Real estate investors seeking funds for new purchases or improvements
- People consolidating high-interest debt into a lower fixed rate
- Small business owners using equity to support growth
Final Thoughts
Unlocking the value in your home no longer requires a lengthy bank process or high fees. With streamlined digital tools and competitive offers, homeowners and investors now have more control and convenience when accessing their equity.
If you’re exploring options to renovate, invest, or manage your finances, a HELOC from a trusted digital lender like Figure could be the smart, flexible solution you’ve been looking for.
In the previous post: “Is Now a Better Time to Invest in Real Estate Debt or Equity?“
What is A Smarter Way to Finance Your Goals?
Has the U.S. Housing Market Finally Begun to Thaw After the Pandemic?
It seems like the housing market might be showing signs of life. According to a recent report from Redfin, pending home sales in early October have seen their largest year-over-year rise since 2021, with a 2% increase in the four weeks ending October 6.
This news is likely to be welcomed by real estate investors who have felt the market has offered limited opportunities over the past few years. However, it’s important to take a cautious approach—one promising statistic doesn’t necessarily indicate a broader trend.
Is the Housing Market Truly Recovering?
Let’s explore the different factors at play.
Interest Rate Reductions: A Critical Factor or a Red Herring?
The Redfin report links the surge in pending sales to the Federal Reserve’s much-anticipated rate cut announcement in mid-September. According to Redfin, this announcement prompted buyers to re-enter the market in late September, despite mortgage rates having already been falling for weeks before the cut.
This psychological boost is crucial. Although buyers were aware of the falling rates beforehand, many seemed to be waiting for a formal signal to act. This could be attributed to a lingering fixation on the ultra-low rates of 3% to 4% that buyers enjoyed before 2022.
Any rate cut announcement serves as a nudge for prospective buyers, making them feel that now might be the right time to purchase, even if mortgage rates had been decreasing already. In an unstable mortgage market, such announcements hold significant influence.
However, mortgage rates are just one piece of the puzzle when analyzing housing market performance. As noted by Investopedia, the real estate market is driven by four primary factors: interest rates, demographics, economic conditions, and government policies.
Demographics: Shaping the Market
During the pandemic, demographic shifts had a profound effect on U.S. real estate, with major population movements like the Sunbelt migration fueling booms in cities such as Phoenix and Austin, which later became unaffordable for many.
Age is another key demographic factor, and the millennial generation’s pent-up demand continues to be a driving force behind the rise in home purchases. Despite the challenges of the past few years, millennials who have longed to become homeowners are now entering the market in greater numbers, as more properties become available.
Rising Inventory: A Sign of Stabilization
A key factor contributing to the market’s stabilization is the growth of housing inventory over the last year. The pandemic had a significant impact on the availability of homes, with sellers hesitant to list properties due to COVID-19 restrictions and, later, higher mortgage rates.
Some homeowners, particularly those upgrading to larger homes, found it financially challenging to sell and take on higher mortgages. Others, however, simply chose to wait for a more favorable market.
Although the latest Realtor.com report shows that inventory remains down by 23.2% compared to pre-pandemic levels, we are seeing an upward trend. For instance, new listings have been rising since last year, with a 5.7% year-over-year increase for the four weeks ending October 6.
As of September 2024, some states have even surpassed their pre-pandemic inventory levels, including Tennessee, Texas, and Idaho, with others, like Washington, close behind.
Vulnerabilities in Certain Regions
However, not all regions are showing positive signs. For example, some areas, particularly those affected by extreme weather, have seen inventory spikes not because of market recovery, but due to homeowners trying to offload damaged properties they can’t afford to repair.
For instance, regions like Florida and North Carolina, hit by hurricanes, have experienced increases in home listings, but these may reflect a response to climate-related challenges rather than market health.
Opportunities for Investors
Investors should be discerning when choosing markets, focusing on regions where inventory is growing due to increased home construction rather than climate-related distress. States like Idaho, Utah, North Carolina, and Texas, which are building new homes, offer potential, though caution is needed in areas prone to natural disasters.
The Midwest and Northeast, meanwhile, still face significant challenges in recovering to normal market conditions. These regions have lower rates of new construction, meaning inventory remains scarce, which could present both opportunities and difficulties for investors.
The Bottom Line
The U.S. housing market is showing signs of recovery, but the situation remains complex and varies by region. Interest rates play an essential role in unlocking the market, but investors should also consider other critical factors, such as homebuilding trends, climate risks, and government policies. While the market is heading in the right direction, it’s crucial to examine regional differences carefully before making investment decisions.
In the previous post: “Is Now a Better Time to Invest in Real Estate Debt or Equity?“