Subscribe Feed (RSS)Pity the poor HELOC. Ostracized by some as demonstrating what is wrong with the American consumer, the HELOC fell out of fashion when credit tightened and the financial markets collapsed in 2008.
But, much like the fabled phoenix which rose from the ashes, the HELOC is back though not looking quite the same as it did before – yes, its wings have been singed, if not a bit clipped.
HELOC Defined
Oh, what exactly is a HELOC you ask? That would be Home Equity Line Of Credit, a method for consumers to borrow money off of the value of their homes. Popularized throughout much of the past decade, HELOCs allowed homeowners to reap the rewards of their rapidly increasing home values by borrowing money to finance $100,000 kitchen renovations, enjoy expensive vacations, pay for their children’s college education, and more.
Critics hated HELOCs, blaming these types of loans with helping to push up the price of housing, encouraging predatory lenders to jump in, and putting millions of homeowners in a vulnerable position, with many people losing their homes when property values plummeted and jobs were lost.
Careless Consumers?
And you know what? The critics do have a point: a number of people were very careless, borrowing more money then they needed and foolishly spending it on stuff they didn’t need. Still, a HELOC does offer a number of benefits which is why they’re still being written by lenders and grabbed by eligible consumers.
If you’re considering a HELOC, some things HAVE changed over the past few years including:
You must have very good credit – Even if you have a sizable amount of equity in your home (and for many homeowners this no longer holds true), expect lenders to carefully look at your credit history and only offer you a HELOC if your credit score is very good.
You can’t borrow the full amount – Previously, many lenders allowed homeowners to borrow the full amount of equity in their homes. This means that if the consumer had a house valued at $300,000 and owed $220,000 on the first mortgage, then a lender would consider a $80,000 line, in some cases even more than the home’s worth. Today, you’ll be lucky to get $20,000 because few lenders are willing to let you borrow more than 80% of the value of your home.
Emergency Line
Perhaps one of the best reasons for homeowners to consider a HELOC is this one – an available line of credit to handle life’s emergencies. The last two years offered many challenges to Americans, certain thing which even worsened when funds dried up. By having access to a HELOC and using it wisely, you can borrow funds when needed to cover a crisis.
Adv. – Have you considered a HELOC? Carefully weigh your options before securing a line. Rates are low, lenders are willing and a line could help you complete important renovations to your home, including replacing your roof, windows and doors, add a room, and more. Get a HELOC quote today!
Tags: cash, HELOC, home equity, home equity loans, homeowner, real estate
According to Trulia.com, which tracks the US real estate market, nearly one in four homes currently on the market has already gone through one round of price reductions. This is taking place even as sellers are pricing their homes at rates much lower than a year ago. Finding that their homes are not selling at the original asking price, 23.6% of homeowners have lowered their home prices at least once. Trulia’s data excludes foreclosed homes.
Housing prices also tumbled, so much so, that homes valued at one rate in 2004 were worth less than that in 2008. In fact in some markets home prices fell to levels not seen since around 2000 or 2001.
