In the boom times of the residential real estate market, home equity lines of credit (HELOC) were as common as air. It seemed as if every homeowner had a HELOC. Many consumers opened lines of credits with their banks in order to make home renovations, pay for college education, or make purchases. Additionally, some homeowners simply opened the HELOCs to meet any future emergency needs. But due to the credit market crises many banks and other lenders have frozen existing line of credits.
Thousands of homeowners have been shut off from their HELOCs as equity lenders are attempting to recover from the geyser of losses stemming from subprime mortgages, adjustable rate mortgages, and rising foreclosures. As of eight months ago, delinquencies on HELOCs have risen by 47%, according to Economy.com; it is projected that the numbers will jump higher in 2008. The nation’s largest mortgage home loan lender, Countrywide has already suspended approximately 122,000 lines of credit, USAA has frozen some 15,000 lines, and big financial institutions like Bank of America, Chase, and Citibank are following suit.
The suspension and reduction of HELOCs is not a generic across the board action but on a case by case basis. During the real estate boom, people could easily borrow up to 100% of a home's market value through a combination of a first mortgage and a home equity line of credit. At present, accessing a 100% of equity in your home is a more complex occurrence.
Today home equity and mortgage lenders are applying mortgage loan standards to existing HELOCs. Before your lender freezes or reduces your HELOC, access your cash right away. At the moment lenders are looking for reasons to freeze or reduce your credit line, thus they are monitoring credit scores, missed payments, and more, so avoid doing anything that can flag your account.
If the need of the hour is to get lump sum money right away then this is the perfect time to draw on your home equity line of credit. If the current housing, mortgage, and credit market continues following its southward path, then the downside could be that you'll cut your equity; you'll be obligated for the interest now; and if home prices continue to decline, your equity loan value could top your home's value.
Some experts advise home equity borrowers to access as much money as they need and place the cash in a high-yielding savings CD account until the bills come due. If you have difficulty getting a new HELOC or accessing an existing one, start shopping around. Start your search with MyHomeLoanMortgages.com and get the best HELOC rates.