Banks Freezing Home Equity Line of Credit - Is Your Equity Lost

What would you do if your bank called to tell you that your home equity line of credit had been frozen or even canceled? For most homeowners, shock would be the first emotion followed quickly by confusion.

Why would banks be pulling the line of credit from homeowners who have had no trouble paying off the loan. Banks have recently been pulling home equity lines of credit from all applicants, even those homeowners who never tapped the line of financial credit.

Home Line Of Redit

The number of homeowners who have been affected have been in the tens of thousands, as more and more banks are trying to stem mortgage losses. As banks are dealing with heavy losses from their subprime mortgages and additional high risk loans, the viable home equity loans are also taking a hit as the bank pulls the money before this equity credit line also becomes a problem.

Essentially, banks are trying to save their money from being lost to homes that fall into foreclosure. There are many home owners who took out lines of credit on their house when the real estate market was high. Now these some home owners are needing to sell their house but are having obvious problems finding home buyers. The first thing home owners look to for money when they can no longer afford their mortgage is the equity in their house.

In late third period of 2007, the delinquencies on HELOC mortgages increased 47 percent from the previous year. Analysts have predicted higher numbers for 2008. For this reason, banks have been responded by pulling their Home Equity Lines of Credit, most of which were in high foreclosure cites like, Las Vegas Nevada, Stockton California, Boise Idaho, Miami Florida, Houston Texas, New Jersey, and Orlando Florida.

Where are you most vulnerable to have a frozen HELOC? If you live in a housing area where prices have fallen by 10 percent or more, your property might be the prime target for a HELOC freeze. There are new lending standards which means that your HELOC will be in danger of disappearing if you bought your home with little money down, especially if you purchased your new home within the last few years.

These factors will combine to see a higher rate of foreclosures and might make your financial institution feel that they need to pull the plug on the HELOC before real money troubles begin. Whereas lenders were able to borrow as much as 100 percent of the home value in previous years, most homeowners cannot see more than 90 percent or even as high as 60 percent in some areas that have been severely hit by declines in the housing market.

If you established your HELOC a few years ago, you might be in for a surprise. Current lenders are applying the same revised standards retroactively to current HELOC owners. In order to verify your loan cap, you should contact your bank to see if your loan is at risk. If you miss a payment or have a change in your credit score, your HELOC might also be flagged for a potential freeze.

What should you do? If you are using your HELOC to finish a renovation, you can potentially pull out a lump sum in order to finish the project. You will want to only take what you need so that you do not get into harder financial troubles.

If your HELOC has already been put on hold, you can fight the decision with your financial institution. Look to see why the line was suspended and what you can do to appeal the decision. As many banks automate the process to freezing the loans, you can appeal to a person for a reverse in the decision.

If you are thinking of using your home equity line of credit to pay your mortgage while you sell your house, you might want to pull money out quick. The banks are implementing this new freeze standard nation wide so save the money they have. Your best option to sell your house fast is to get an offer from a local home buyer. These professionals are in every major city in the nation and make their living from helping people sell their house fast.

Banks Freezing Home Equity Line of Credit - Is Your Equity Lost

Home Equity Loans vs. Home Equity Line of Credit - What's the Difference?

Home equity loans and home equity lines of credit are very beneficial, and can provide homeowners with quick cash for a variety of purposes. Although similar, there are key differences that make these loans unique. Before using your home's equity for home improvement, debt consolidation, etc., compare both options.

What is a Home Equity Loan?

Home Line Of Redit

Home equity loans are similar to other types of personal loans. The majority of personal loans are secured. Usually, an applicant will provide the lender with a vehicle title or other valuable piece of property. With a home equity loan, your home is the collateral.

Home values are constantly increasing. Moreover, mortgage principles decrease. The difference between a home's value and the amount owed to the mortgage lender equals the equity. For example, if your home is valued at 0,000, and you owe the mortgage lender ,000, the home's equity totals ,000. With a home equity loan, the homebuyer may choose to access all, or part of the home's equity.

Benefits of Home Equity Loans

The majority of home equity loans have fixed rates and payments. Secondly, the money is acquired as a lump sum. Once the homeowner receives the funds, the money can be used for any purpose. The average term of a home equity loan is 15 years. However, homeowners have the option of repaying the money sooner.

What is a Home Equity Line of Credit?

Similarly, home equity lines of credit are based on the home's equity. Instead of funds being received in one lump sum, lines of credit entail revolving credit accounts. If approved for an equity line of credit of ,000, a credit line is established for this amount, and homeowners may withdraw funds as needed.

Lines of credit can be compared to credit card cash advances. However, the rates are much lower on a line of credit. The length of a line of credit is usually ten years. At the end of the term, the homebuyer may choose to apply for another credit line. Because the rates are variable, payments are not predictable. To avoid high monthly bills, homeowner must quickly repay the money, and withdraw small amounts.

Home Equity Loans vs. Home Equity Line of Credit - What's the Difference?

Debt Consolidation Mortgages, Home Equity Loans and Lines of Credit

If you own a home and have a debt load you can no longer handle, one place to go to solve the problem is to the equity in your home. This can mean either getting an entirely new mortgage (sometimes called a debt consolidation mortgage) or applying for a Home Equity Loan or Home Equity Line of Credit. The best option for you will depend on how much equity you have in your house already, and how long you've had the mortgage. We'll review all three options in this article.

Debt Consolidation Mortgages

Home Line Of Redit

Getting a new mortgage to consolidate your debt is a good deal for people who having been paying their mortgages very long. This is because of the way mortgage amortization schedules work - you pay most of the interest on your loan upfront.

So if you have a 30 year mortgage and needed to get a debt consolidation mortgage, it would be much better to get the mortgage in the first ten years of your mortgage's repayment, rather than in the last 10 years. In the last ten years, you'd have already paid all that nasty interest, and would now be paying your mortgage's principle

down. To get a new mortgage then would almost be just tossing away all that interest you paid for, for nothing.

But getting a debt consolidation mortgage in, say, the third year of your 30 year mortgage, you'd be starting your mortgage payments over again fairly early. In other words, people with little equity in their homes would probably benefit more from a debt consolidation mortgage than a home equity loan or line of credit.

Keep in mind that getting a new mortgage will require a new closing, and mortgage closing can cost hundreds, even a couple of thousands of dollars. In this aspect, debt consolidation mortgages aren't as good a deal as home equity lines of credit, which can be gotten with no closing costs.

Getting the Equity Out: Home Equity Loans and Lines of Credit

Don't think that someone who's in the last ten years of paying off a 30 year mortgage is in worse shape that the person on only year three, though. Quite the opposite. Home equity loans and lines of credit are among the best options for a debt consolidation loan.

If you meet the following criteria, all that interest you've been paying suddenly becomes a major tax deduction:

- you itemize your tax deductions

- you are deducting interest for your first or second homes only

- the loan is for no more than 0,000

- the interest you want to deduct on any amount of the home equity loan can not be more than the difference between the market value of your home and your mortgage.

For example, say your mortgage is for 0,000 and the market value of your home is 0,000. You can not deduct more than the interest on ,000 worth of your home equity loan. Of course, owing more on your home than its worth is a very, very bad situation in the first place.

The biggest drawback with home equity loans and lines of credit is that your house is the collateral, so if you don't change your spending and earning habits and turn your debting into saving, you could find yourself unable to pay the home equity loan, and then in a position where you could lose your house.

Home Equity Loan

These debt consolidation options usually have a fairly low interest rate, but the rate can be variable. You take out a lump sum to consolidate your debts, then pay the home equity loan back with a fixed monthly payment. Be sure you understand the terms of the loan - those variable rates can turn a good loan into a bad loan.

Home Equity Line of Credit (aka HELOC)

This kind of loan is a bit more like a credit card. You get approved for a given amount, and then you can draw as much as you want from it, whenever you want, by writing a check. The amount the lender gives you depends on your home's value (both Home Equity Loans and Lines of Credit usually involve getting an appraisal of your house) and how much you ow on your mortgage. Typically, they'll give you 70-80% of the difference between the two.

Do NOT work with lenders that encourage you to borrow more than the value of your house. In today's uncertain real estate market (and larger economy), if you take a loan like that out, and the real estate values in your neighborhood drop, the lender may be able to call your loan. That means you either pay up, or they take your house. This same principle applies to the recently very popular interest-only mortgages.

Avoid these risky loans at all costs. The idea of getting a debt consolidation loan is to get you out of financial trouble, not into more.

Debt Consolidation Mortgages, Home Equity Loans and Lines of Credit

How Does A Home Equity Line Of Credit Work

People often need a source of credit for an important project that they have embarked on. This could be investing in shares, taking some further education courses or extending their home. By the very nature of these tasks, the money to finance them could be needed over an extended period and in varying amounts. Thus a source of credit is useful to fund these projects. This is where a home equity line of credit fits in. This article will discuss how a home equity line of credit works and some things to consider if you decide to take one out.

If somebody owns a home or is paying a mortgage off for a property they may be eligible for a home equity loan line of credit.

Home Line Of Redit

The principle behind the loan is that a lender will lender around 75-80% of the value of a property to the property owner. If the property is worth 0,000 and the owner has paid ,000 of the mortgage, then the lender may lend the owner another 25-30% of the value of the property (,000 - ,000).

If the property owner decides to take a line of credit for this amount then the money can be drawn on over a period of time much like you might use a credit card. It is, in effect, saying that you have a credit card charged up to ,000-30,000 that you can use however you see fit.

Once again, it is important to stress that although it is like a credit card, the money should be used wisely. Ultimately, this money is secured by your property. If your spending gets out of hand and you can't pay back the line of credit you could lose your house. Use the credit to add value to something or that has a high return on investment potential.

If you decide to go for an home equity line of credit then it is important to look around at the best deals. In most cases you will get your line of credit with the mortgage company that you already have the mortgage with but you can negotiate a better deal if you know what other equity line of credit deals are around.

One thing to consider is the home equity line of credit rates. This is the rate of interest you will be charged for using the credit. In most cases, if you have a variable rate home loan, you will be charged at this rate. If you have a fixed rate, then the interest rate on the line of credit will be worked out when you apply. This can be negotiated if you know that you can get a better deal elsewhere. The chances are that the lender will not want to lose your business so may meet you half way. The same goes for the additional costs. These could be arrangement fees and closing costs.

Home equity line of credit loans are a flexible way to have access to a large amount of money (depending on the equity in your home) but always use the money prudently.

How Does A Home Equity Line Of Credit Work

Bad Credit Home Equity Line of Credit - Choosing the right provider

A home equity line of credit allows you to draw on your home equity
without pay at the closing rate. For people with bad credit
Credit secured by your assets can offer low prices. With your
Credit wisely, you can use a credit line to establish a good credit rating again
Evaluation. However, you must choose the right lender, to ensure
get a good deal on rates and taxes.

What you need for a home equity line of credit by Show

Home Line Of Redit

Withbad credit, you must pay special attention to words
Agreement with a credit line. With most lenders, you will not need
do not pay closing costs. So you want to save on investment costs of a second mortgage.

Their price may be fixed or adjustable. With most lenders, adjustable
Prices start at less than fixed rate loans. Credit lines also allow
You borrow the money needed. You pay only the interest on the sum
You use.

The fees are also part of a series ofCredit. You may be able to prematurely
Payment, minimum balance or other charges. Before signing a contract,
understand how taxes affect your credit plans. For example, if you want
to pay off the credit line to ask in a year, so for an advance payment
To remove the fee.

Several banks lead to different conditions

Different lenders write their loan terms in a different way. Variations
Expected price, but so should the differences in fees, payment
Times,and future refinancing possibilities.

While low prices are important, take a look at conditions when
Consideration lender. Savings can also be found with low absorption through the funding
Cost of sales and refinancing.

How To Lenders

When comparing lenders, you must start by requesting quotes loan. With
adverse credit scores, in collaboration with subprime lenders.

Most companies use a website where you can enter your information
Get a quote.Beyond the research note in installments, even the terms.

Most of the offers available financial fees, the payment structure and
Refinancing costs. If you do not perform basic terms, then ask for more
Information before committing to an offer.

Bad Credit Home Equity Line of Credit - Choosing the right provider