With all the hype and seductive ads about home equity loans, are you curious to find out if you are missing out on something. I mean it seems everywhere you look or listen there's an ad for a home equity loan that sometimes appears to be too good to be true. Millions of Americans are taking out these extremely profitable (for the lender) loans. So what's the problem you ask?
Foreclosures and defaults on homes are at an all time high and the Federal Reserve expects them to continue to increase as many homeowners get to the conversion point on their ARM's. Many homeowners are in big trouble and may not even know it.
Home equity is the difference between what your home is worth and the amount you owe on it. For most homeowners their home is their biggest asset and it usually represents a treasure trove of cash.
In 2005 the value of home equity across the US was $11.3 trillion. The percentage of home ownership in 2005 was 69% down slightly from the record 69.2 % in 2004. Almost 124 million Americans own their own home.
So there is plenty of money available to lend. Before you get a home equity loan you should know these facts.
• They are secured by a second deed of trust on your house.
• If your financial situation changes your home could be at risk of foreclosure.
• Having to make two payments on your home can be a lot of financial strain.
• A lot of unscrupulous lenders could care less.
• Keep your eyes open to what the local housing market is doing. Just recently many areas experienced a 10% decline in values in one month causing many homeowners to owe more than their home was worth.
The point is DON'T FALL FOR THE HYPE. Keep your eyes and your mind open. Don't press the EASY button.
Have lenders FIGHT for your business if you are in the market for a mortgage, home equity loan, or refinance.
By J Krohn
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