HOW TO USE YOUR HOME EQUITY WISELY
Avoid The Costly Mistakes Of The Housing Crash By ADRIAN D. GARCIA
TBANKRATE
he home equity picture in the United States looks pretty similar to the way it did pre-recession. Collectively, homeowners have $15 trillion tucked away in their properties — about a trillion and a half dollars north of the high mark before the recession, based on federal data.
But this time around, people seem unwilling — or unable — to use their homes to come up with some extra cash.
The percentage of people using their homes to secure loans remains exceptionally low. Some experts view the change in borrowing behavior as a sign that consumers are more financially savvy about avoiding the pitfalls of using home equity witnessed during the last housing boom.
Homeowners held 4.2 million home equity loans and 10.3 million home equity lines of credit (HELOCs) collectively as of March, the lowest numbers in each category since at least the first quarter of 2008, according to Equifax.
Cautiousness around using home equity — the difference between how much the house is worth and any debts against the home — is a smart move by consumers, says Greg McBride, chief financial analyst for Bankrate.com.
“The people that got into trouble by tapping home equity during the late stages of the last economic expansion were the people that weren’t timid at all,” McBride says. “Those that were timid and hesitant were better protected when home prices fell.” purchases and was largely unchanged during and after the housing boom.
Later research from the team shows some borrowers may have been using home equity to help make down payments and then turning to a traditional auto loan to cover the rest of the auto purchase.