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Millennials Want Home Equity Access

Estate--equityHomeowners are tapping into equity at the fastest rate in eight years, thanks to rising home prices. And millennials are leading the pack of those who are cashing in.

In 2016, the number of homeowners with potentially “tappable” equity rose to 39.5 million—those are borrowers who have at least 20 percent equity in their homes, according to Black Knight Financial Services.

Millennials, in particular, are turning to HELOCs—home equity lines of credit—more so than Generation X members or baby boomers, according to a recent survey by TD Bank. More than a third of millennials say they’re considering applying for a HELOC in the next 18 months. That is more than double the rate than Generation X and nine times higher than baby boomers.

“We are a little surprised about that,” Mike Kinane, general manager of home equity products at TD Bank, told CNBC. “I think millennials are taking a more conservative approach, but they recognize that HELOCs have a good purpose, especially for remodeling.”

Indeed, remodeling was the number one motivation for taking out a HELOC last year, according to the TD Bank survey (debt consolidation was number two). Millennials are entering the housing market slower than previous generations. When they do buy, they often are purchasing lower-cost, fixer-upper homes. As home prices rise, they’re pulling out equity from the home to remodel. They say their main motivation to renovate is to increase the value of their home, according to the TD Bank survey.

Millennials are being more reserved in taking out HELOCs. Borrowers who did do cash-out refinances last year still had near 35 percent equity remaining in their home, which is the lowest on record, according to Black Knight. They also had an average credit score of 750.

“Customers are borrowing a lot less than they could borrow if they needed to,” Kinane says.

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