Key points: 

• Borrowers often mix up home equity lines of credit and home equity loans. 
• That confusion can lead to more work — and even lost leads — for loan officers. 
• A strong website can help to clarify both lending products and empower borrowers to make the right decision for themselves. 
• Your website needs to display HELOCs and home equity loans differently to comply with TILA’s Regulation Z. 

Lending products backed by home equity have been on the rise. Bankrate reports spikes in both home equity loans (HELOANs) and home equity lines of credit (HELOCs) in recent years.  

And it’s no surprise. While home prices have held at high levels and interest rates haven’t come down much, current homeowners don’t want to sell. But that doesn’t mean they want to sit on a bunch of illiquid capital either. HELOCs and home equity loans give them a way to turn some of the value of their homes into cash in their hands.

This is a prime opportunity for mortgage lenders today. But to really seize it, you need a website that works for equity-backed products. 

Why website confusion about HELOCs and home equity loans costs you

A lot of lending institutions dump all of their equity-backed products onto one webpage. You might show HELOC and home equity loan rates side by side, or you might not even differentiate between the two. 

We understand. The whole goal is to let homeowners know they have a way to access their equity that doesn’t require a refinance. But lumping HELOANs and HELOCs together can cost you in two distinct ways. 

With leads

You probably wish nearly every lead had deeper education about mortgages. And if you think common knowledge is lacking when it comes to purchase loans, equity-backed products are a whole different animal. 

While people might have a decent handle on their primary mortgage, introducing a second mortgage often comes with plenty of confusion. Many people don’t understand the difference between the open-end credit of a HELOC and the closed-end credit of a home equity loan. And that means they don’t understand what these products would mean for their finances. 

By grouping HELOC and home equity loan information together on your website, you add to the confusion here. Clear delineation helps potential borrowers understand that they have two distinct options that function in different ways. 

With regulatory authorities

While borrowers don’t always fully grasp the difference between open- and closed-end second mortgages, regulatory authorities absolutely do. Case in point: when writing the Truth in Lending Act (TILA), they broke them into distinct categories.

Regulation Z of TILA speaks to disclosure requirements for both home equity loans (Subpart C - Closed-End Credit § 1026.17–§ 1026.24) and HELOCs (Subpart B - Open-End Credit § 1026.5–§ 1026.16). 

Under those rules, you can’t display the interest rate for either type of second mortgage by itself. It always needs to be accompanied by an annual percentage rate. 

Beyond that APR, the information you display about HELOANs can be fairly streamlined. But HELOCs come with a bunch of additional disclosure requirements. So lumping home equity loans and HELOCs together can land you in hot water on the regulatory front. 

Second mortgage rate display that works for everyone

We don’t say all of this to encourage you to hide rate info for your second mortgage products. In fact, showcasing live rates can set you apart from the competition, helping you build your revenue base even while home sales decline.

Fortunately, you can educate borrowers and satisfy TILA requirements in one fell swoop. The trick is that you need to display HELOCs and home equity loans separately. 

Home equity loan rate display

You might keep your home equity loan section fairly simple. Most people can pretty quickly wrap their heads around a HELOAN because it’s so similar to the mortgage they already have. 

You can’t only advertise an interest rate, though. HELOAN interest rates always need to be paired with an APR.

Also, be advised that if you include a term or payment amount, that’s a trigger under Regulation Z (§1026.24). That introduces more disclosure requirements, so you may want to stick to the APR. 

HELOC rate display 

HELOCs require more care, both from an education and a disclosure requirement perspective.  

First up, you might want to offer a more in-depth explainer on HELOCs. Borrowers often best understand them when you compare them to a credit card. 

Then, make sure your HELOC rate display includes everything required under Regulation Z. That means showing:

• APR (not just the interest rate)
• Information on its variability if the rate is variable, including the maximum
• Fees, including ones that get calculated as a percentage of the credit limit, an estimate of the fees for opening the line of credit, and any fees to use or maintain the line
• If there’s an introductory APR, when that ends and what margin and index applies afterward

Clearly, there’s a lot to consider here. But we have a way to make it all much easier. 

Setting borrowers and your company up for success

We’ve designed BankingBridge tools to integrate directly with your pricing engine while including all of the disclosures required by Regulation Z. Our newly launched HELOC rate table ticks the above boxes while keeping live HELOC rates accessible on your site, for example. 

Then, you can focus on helping leads decide which second mortgage is right for them. You might put a header on your webpage that offers a simple explanation (e.g., “Choose a home equity loan if you want a lump sum now. Want the money over time? Consider a HELOC.”).

You can also design the webpage to feature whichever equity-backed product best fits your pricing strength or your desired clientele. We do all the backend work to make sure your rate table displays live rates with all the required disclosures. That frees your team up to focus on guiding borrowers to the closing table.

If you want to see how BankingBridge can power informative, compliant HELOC and home equity loan display on your website, book a demo today.

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