Better rolls out HELOAN as it looks to dominate home equity space

Better Home & Finance is bringing to the market a home equity loan, it announced Tuesday.

This addition increases its suit of digital home equity products, which already includes a cash-out refinance loan and a one-day HELOC. There are plans for additional home equity-related offerings in the future, hinted Kevin Ryan, president and CFO at Better.

According to Ryan, the HELOAN product, which can be originated in a week or less, lends itself to being a beneficial option for borrowers who are looking for a lower interest rate. Compared to a HELOC, HELOAN's can be 1% to 2% lower, he said.

"A HELOC functions like a credit card, meaning that you can borrow the money, pay it down and borrower again, it's a line of credit," Ryan said. "For a HELOAN it's just a one time draw, it doesn't have the same flexibility, but you borrow at a slightly lower rate."

The home equity loan will enable homebuyers to access "up to 90% of their home equity as cash at a fixed annual percentage rate in a total of 30 states to date, with the remaining states being on-boarded to the program," Better said in its press release.

Better's push into the home equity product space comes at a time when homeowners have a historically high amount of equity in their homes.

"A lot of people have a need for cash," said Ryan. "[A home equity loan can be] an alternative to credit card debt and to personal loans. It's borrowing at a lower rate than you would opting for the other products I mentioned. We think the timing for the consumer is very good." 

The timing is also good for bringing onboard more loan originators, Better's Ryan said, though he would not disclose how many LOs they'd be hiring.

"We see an opportunity for growth. We obviously spent a lot of time cutting people, cutting costs," he said. "We've hit a low point in the cycle and we'll have some marginal improvement in the industry over the course of 2024 and then into 2025, so we're hiring now in advance of that."

"We feel like we've gotten the consumer offering, the flow for the consumer to a much better place that we can gradually take market share here," Ryan added. "It's really just taking market share." The company posted a $59 million net loss in the fourth quarter, its second earnings report since going public last summer. That was an 83% improvement from the $340 million net loss over the third quarter of 2023, which leadership credited to its merger to go public. During its earnings call in March, Better executives were bullish on future performance after shifting loan officer pay last year to commission-based compensation plans.

Other companies such as Figure have also jumped on board the HELOC loan craze. Late last year Figure launched a HELOC wholesale loan production platform and entered into partnerships with four independent mortgage bankers to provide a private-label HELOC product as first-lien business declines.