Consumers who are thinking about tapping into home equity are looking at other options are products far more than reverse mortgages, according to the 2023 U.S. Housing Equity Loan Survey from data analytics firm Accurate Group.

When homeowners were asked about the likelihood of tapping home equity in the future, 26% said they are “very likely” or “likely” to borrow against their equity in the next 12 months, according to the survey results. On the other hand, 51% reported that they are “unlikely” or “very unlikely” to borrow against their home equity, while 23% of respondents said they are “neutral” on the idea.

Of those considering home equity lending products, 71% of respondents plan to pursue a Home Equity Line of Credit (HELOC), and 31% of respondents plan a mortgage refinance as their primary option. Meanwhile, only 7% of respondents said they would take out a reverse mortgage loan.

“Higher mortgage rates, record levels of home price appreciation, constrained housing inventories and economic inflation are challenging for both lenders and borrowers,” Paul Doman, president and CEO of Accurate Group, said in a statement. “We conducted this survey to give lenders, loan services and originators better insight into homeowner sentiment to help them plan appropriately and identify strategic opportunities for loan volume growth.”

The survey identified the four main reasons consumers are considering the tapping of home equity based on respondent data. The main reason cited by survey respondents is the interest rate of the loan (50%), followed by job security (41%) and the amount of equity available to borrow against (40%). The performance of financial investments was also cited by respondents (35%).

Of the top reasons respondents would consider taking out a HELOC, the main reason cited was for home improvement purposes (35%) followed by financing a major purchase (15%) and paying off high-interest loans (13%).

“The survey was sent to 1,000 consumers across the nation in Q1 2023, designed to capture homeowner intentions and tolerance for engaging in real estate lending over the next 12 months – with a specific focus on how homeowners plan to leverage home equity,” the company said. “Survey questions centered around the likelihood of homeowners to apply for a home equity line of credit or loan, refinance an existing mortgage or take out a reverse mortgage.”

When it comes to reverse mortgages versus HELOCs, a recent publication by the Urban Institute assessed the viability of the Federal Housing Administration (FHA)’s Home Equity Conversion Mortgage program compared to other equity-tapping options.

Housing experts noted in the op-ed, published earlier this year, that the options seniors have for tapping home equity while remaining in their homes are limited. The two most common options are HELOCs and cash-out refinances, both of which require assets outside of a home’s equity.

“This leaves HECMs,” the op-ed stated. “As with HELOCs, cash-out refinancing, and second mortgages, the borrower takes out a loan against the value of their home. But unlike in those programs, the borrower need not pay the loan back until the home is sold or the borrower passes away or moves, with the FHA insuring lenders against any loss on qualifying loans. This allows the FHA to require lenders to focus on the home’s value in underwriting the loan rather than the borrower’s income or savings, opening the program up to those who no longer have much income or savings beyond their home equity.”

However, the program has been challenged recently by liquidity problems, in addition to other issues recently faced by reverse mortgage companies, including depressed volume, a major bankruptcy and the consolidation of other leading players.

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