American Homeowners Spend over $100 Billion On Unnecessary Interest Payments

New study shows that secured borrowing options can save typical homeowner over $6,000

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Sep 12, 2019, 08:07 ET

SAN FRANCISCO, Sept. 12, 2019 /PRNewswire/ -- American homeowners are paying $100 billion more in loan interest payments when lower-cost options are available, according to new research published today by Figure Technologies (Figure), a leading digital home equity lender.

The research shows that millions of homeowners are relying on personal loans and credit card debt[i] even when they have sufficient home equity to cover their financing needs with a secured loan, which typically has much lower interest rates. Data analysis has found that 16.3 million homeowners considered in the study are paying on average $6,225 more than necessary on interest payments.

"Currently, borrowers are paying the highest interest on credit card balances of any time in the last 24 years," said John Sweeney, Head of Wealth and Asset Management at Figure. "Refinancing expensive debt using home equity may be the easiest way for a homeowner to save thousands of dollars."

Home equity in the United States is at a record-high $15.8 trillion[ii], and $6.3 trillion[iii], also a record high amount, is considered available for borrowing by typical industry metrics.

The research highlights a number of recent trends that have pushed homeowners towards more expensive debt options, which include personal loans and credit cards. These trends include:

Over the last decade, personal loans have been heavily marketed, and loan volume rose threefold from 2011 to 2018.
Credit card debt has risen past the previous peak in 2008 and hit a new high of $1.05 trillion in December 2018.
Since the 2009 housing crisis, banks have tightened lending practices to make HELOC applications more cumbersome, slow, and expensive, involving reams of forms and up to 60 days to close.

Thousands in potential savings across the US

The study shows that the average American homeowners who have at least 15% equity in their home are carrying $14,350 in debt, and that they have sufficient equity to refinance $12,549 of that—$2,941 in personal loans and $9,608 in revolving credit card debt.

If these homeowners consolidated that amount of debt using an 8% home equity line of credit (HELOC), they would pay $2,799 in interest over five years. If they instead applied the same monthly payments to their personal loan debt and credit card debt (assuming industry-typical interest rates of 12% and 18.2% respectively), the homeowner will pay $9,025 and take 2.5 years longer to pay off the debt.

In other words, the homeowner that refinances using a HELOC would save $6,225.

Homeowners in Alaska, Texas, and South Dakota could save the most: an average of $8,077, $7,169, and $6,433, respectively.

Whereas traditional banks often require that potential customers undergo a 30 to 60-day process, at Figure most qualifying applicants need only 5 minutes for approval and can receive a loan in as few as 5 days^*.

For full details, research, and methodology of this study, please visit:
https://figure.com/docs/Figure-WhitePaper-EstimatingAmericanHomeownersPotentialSavings.pdf

For a homeowner case study, please visit:
https://figure.com/docs/Figure-Case-Study-Susan-Paul.pdf

About Figure
Figure Technologies, Inc. is a financial technology company that creates innovative consumer financial solutions for home improvement, debt consolidation and retirement, while providing its members with financial education and financial empowerment. Its mission is to build and promote innovative financial products on blockchain that benefit consumers and eliminate rent-seeking, illiquidity and other inefficiencies present in current financial markets. The company's flagship product, the Figure Home Equity Line, is the world's fastest HELOC and uses Provenance.io, the blockchain protocol Figure created. Based in San Francisco, Figure was co-founded by Mike Cagney, former co-founder and CEO of SoFi, along with Alana Ackerson, Cynthia Chen and June Ou. Figure has more than 200 employees in offices in California, Nevada, Montana and Utah. Figure has raised over $130 million since its founding in January 2018.

Contact information

Otto Pohl, Head of Corporate Communication, Figure Technologies, [email protected], +1.917.915.4400
Davis MacMillan, Managing Director, RF|Binder, [email protected], +1.212.994.7509

Figure Lending LLC. 650 California Street, Suite 2700, San Francisco, CA 94108
Equal Opportunity Lender. NMLS #1717824

*Five-day funding timeline assumes closing the loan with our remote online notary. Funding timelines may be longer for loans secured by properties located in counties that do not permit recording of e-signatures or that otherwise require an in-person closing, or if the 5-day period includes a weekend or holiday. Funding in 5 days is not available for first lien loans secured by owner-occupied properties in Vermont.

[i] The Experian categories included in this research are Revolvers, Rate Surfers, Consolidators, and Mixed

[ii] https://www.corelogic.com/news/corelogic-special-report-the-role-of-housing-in-the-longest-economic-expansion.aspx

[iii] https://www.housingwire.com/articles/49963-homeowner-tappable-equity-reaches-an-all-time-high-of-63-trillion

SOURCE Figure Technologies, Inc.