Home Equity - Upside Down? Was it Smart Tapping into It?

Cancellation of Home Equity Loan Credit Lines.  The news headlines for the past week or so was the cancellation of many outstanding lines of credit on homes.  For many homeowners that had not tapped into it, it was an emergency safety net and a place to obtain quick cash if they ever needed it during an emergency.  It is analogous to a tight rope walker who now walks the rope without a safety net below to catch them if they were to slip and fall.  Home owners that used their home as an Automated Teller Machine - ATM added to the quick demise of the product offering.  They cashed in against the home's value to pay off cars, vacations, debts, credit cards while their home values flat-lined. A few years ago many homeowners believed that if they could borrow against and appraised 125K even though sales in their neighborhood were only at 100K...then their home must be worth 125K.  It isn't.  In todays market there will be many home owners that owe more than their home is worth for decades to come. (Supposed they borrowed up to 125K and home values have fallen to 92K!)  The home owners are now upside down for sometime to come!  Well the banks and lenders that made these loans have wised up and have started cancelling these loan arrangements due to declining real estate values and sales.

In today's frenzied real estate market that changes by the hour, in Des Moines Iowa yesterday, CitiGroup announced that it was laying off 185 home loan employees because the sale of those lines of credit are next to impossible these days.

It is almost impossible for an agent to sell a home that has no equity without the seller taking cash to closing.  Most sellers do not have this type of disposable cash to make this happen.  Home owners are now in a precarious situation and many now are finding that they cannot refinance the home because the neighborhood values no longer support the value by any stretch of the imagination.  The result?  Foreclosures, bankruptcies and lots of them!  Buyers - Don't fall into lending traps!

Homebuyer advice:

• Buy Right - Buy a home at the best possible price and terms.
• Put down as much cash as possible!
• 30 year fixed rate financing.
• Pay down the principle and build equity!

Atlanta Homes for Sale

Subscribe To Our Atlanta Real Estate Blog in a reader