loanDepot added a first-lien home equity line of credit (HELOC) to its product suite that will enable homeowners without a mortgage to borrow from their home equity.
The first-lien HELOC program will allow borrowers to access the equity in their homes with flexible terms that include a three-year draw period, an interest-only payment period of 10 years and a 20-year amortizing repayment term in most states, the company said in a statement on Wednesday.
While many HELOCs are second-lien loans that require homeowners to have an existing mortgage on their property, a first-lien HELOC is a type of credit line secured by the home in which the lender holds the primary claim on the property.
“Homeowners are sitting on unprecedented levels of equity right now, particularly those who no longer carry a mortgage,” Jeff Walsh, president of LDI Mortgage, said in a statement.
“However, even without a mortgage, many feel the pinch of rising expenses, including insurance and property taxes, which put more pressure on monthly budgets. That’s why we’ve added the first-lien option to our equity lending portfolio to support our customers through the entirety of their homeownership journey, not just during the life of their mortgage.”
A first-lien HELOC can be advantageous if the borrower needs flexible access to funds and can handle variable interest rates. But if the borrower defaults, the lender can foreclose on the home because it holds the first-lien position.
loanDepot’s first-lien HELOC product is available in seven states — including Arizona, California and Florida — and will be introduced in additional states by late 2024, the company explained.
The California-headquartered lender rolled out its digital HELOC in November 2022 that allows homeowners to access $50,000 to $250,000 of equity through a 10-year, interest-only line of credit followed by a 20-year variable repayment term with no prepayment penalty.
In its second-quarter earnings report, loanDepot reported progress toward its Vision 2025 plan, which includes a blueprint to simplify the organizational structure while focusing on client service, quality, automation and operating leverage.
The lender posted origination volume of $6 billion in the second quarter, up from $4.5 billion in the first quarter. Purchase loans accounted for 72% of loanDepot’s total volume in Q2 2024. loanDepot’s organic refinance consumer-direct recapture rate was 70% from April to June, up from 68% during the same period in 2023.
