More People Taking Out a Second Mortgage

The number of homeowners who use their home equity to obtain finance has grown considerably in 2013 and continues to rise. This trend is expected to remain in the coming years as well. The fear of delinquency is present, but the new stricter lending rules make second mortgages less risky for both borrowers and lenders.

The number of home equity loans and lines of credit increased by nearly 31% during the first three quarters of 2013 compared to the same period of 2012. In the whole of 2013, the lending against home equity equaled around $60 billion. This is the highest level since 2009. Still, this home equity loan origination volume is more than 7 times lower compared to the volume reached in 2006 during the housing market boom.

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The higher demand for second mortgage loans is a direct result of the housing market recovery. In 2013, housing prices rose by 11.3% on average according to the latest data. This marked the highest annual increase since 2005. As homeowners have growing home equity, they are more willing to use it for financing purchases and projects. The other major factor for the increase in the demand is the lack of income increase. Even though the economy is growing and more jobs become available, many people earn similar incomes to what they earned in three and even five years ago. The lower interest rates play a major role as well.

The predictions for 2014 are that the number of home equity loans and lines of credit will rise anywhere between 5% and 10%. This is a much smaller growth compared to 2013. Even though housing prices are expected to rise even further, second mortgages will be less accessible due to the stricter rules on lending. In order to qualify for such a loan, the homeowner must have combined loan-to-value ratio on both mortgages which does not exceed 80%.



Christian Calvin mortgage Christian is a contributing writer for He is a graduate from the University of Tennessee with a degree in Communications and a concentration in Broadcasting. Christian has served as vice-president for a privately-held company for more than 20 years. Additionally, he has also applied his writing and business knowledge to various websites with a focus on business and sports news . . . both of which are passions. Christian enjoys playing golf and spending time with his family and friends.


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