By Vanessa Toledo-Vickers
Home ownership is a goal for many individuals and families in Connecticut, and we must do all we can to increase lending in underserved communities. As we move out of the pandemic into the recovery stage, financial institutions and not-for-profit organizations have many resources to help people determine if home ownership is right for them.
At Citizens we are proud to support non-profit HUD-certified Housing Counseling Agencies such as Neighborhood Housing Services of New Britain which helps its customers find safe, affordable, and equitable housing. Housing Counseling Agencies have provided thousands of potential homebuyers with sound financial advice, helping them realize their dream of homeownership.
Median home prices are at a record high in Connecticut – pushed by high demand, scarce inventory, and low interest rates. The median sales price reached a new peak in January 2022 of $289,900, a 1.4% increase from January of last year. A recent report from the National Association of Realtors showed that mortgaged homeowners amassed over $2.95 trillion in equity — putting an average of $51,470 in borrowers’ pockets — on an annual basis in 2021’s second quarter, according to CoreLogic.
With gains in home equity reaching historic levels, homeowners are in a position to leverage their equity to fund important life goals efficiently and confidently as needed but should do so in a way that is financially responsible. One option is to leverage a Home Equity Line of Credit (HELOC) which is a line of credit that uses your home as collateral. The amount you can borrow is based on the value of your home minus any mortgage(s) you may have. As you pay off your mortgage and the value of your home goes up – your home gains equity which you can then leverage via a HELOC to renovate your home, consolidate debt, support family, fund education, or purchase a vehicle. A HELOC often has a lower interest rate than other financing options, so it can be a big advantage for homeowners. A HELOC interest rate is variable and adjusts with the Prime Rate. Potential borrowers should take advantage of low fixed interest rates, and shop around for lenders that provide an easy digital experience, fast access to funds and personalized expert advice.
However, options like HELOCs need to be carefully considered. That is why Citizens supports the necessary financial education to make those sound financial decisions. In Connecticut, financial education sessions resulting in hundreds of hours of training and counseling to low- and moderate-income community members have been delivered this year. This includes education on mortgage and tools for home equity.
Customers interested in any financial product should be looking to partner on smart financing options to tackle short-or long-term expenses. They should also find a lender who will help them determine the path forward to pay down their HELOC and minimize risk, in a manageable and cost-effective way that’s tailored to improve their credit score and open up future financing opportunities. For example, our recently rolled out the GoalBuilder Home Equity Line of Credit gives customers financial flexibility to maintain savings, while paying for what’s important today.
No one can predict the future. However, with the right tools, we can plan for it. With the right guidance, HELOCs can provide Connecticut families with the financial flexibility needed to address a range of possibilities. Whether you reside in Greater Hartford or another Connecticut city or town, local homeowners will be equipped to take advantage of the best opportunities and minimize the stress that life often throws at us.
Vanessa Toledo-Vickers is the vice president, CT community development market manager and Community Reinvestment Act (CRA) officer for Citizens.
