Home equity lines of credit reach five-year high

The rise in HELOCs is making up for the decrease in mortgages to first-time homeowners.

Real estate information company RealtyTrac published its first ever U.S. Home Equity Line of Credit Trends Report, which shows that home equity lines of credit (HELOCs) are up to their highest level since 2009. In the 12-month period ending in June, 797,865 HELOCs were originated in the United States, up 20.6 percent from the previous 12-month period and the most in five years. So far in 2014, 15.4 percent of all loan originations have been HELOCs, which would be the highest percentage since 2008.

In the wake of the housing crisis, many borrowers with low credit scores have been unable to get mortgages, but lending institutions are trying to make up for that loss by granting more loans, and at lower interest rates, to existing customers with good equity and credit history — the average rate for a $30,000 HELOC is just 4.8 percent. Conversely, loans from the Federal Housing Administration to first-time homeowners are down more than 26 percent in the past year.

According to Bloomberg, the largest HELOC providers have also had the biggest increase in originations, ranging from 45 percent for JPMorgan Chase to 75 percent for Bank of America, which leads the market.

"This is an opportunity for the banks to offer an additional product to those homeowners they see as already well qualified and have that equity," said RealtyTrac vice president Daren Blomquist to Bloomberg. "HELOCs are a way for them to actually expand their mortgage businesses rather than have to cut back."

A real estate amortization schedule can help borrowers maintain a high credit score by programming automated payments that take the borrower's financial capabilities into account.