home equity

It was just a few years ago that everyone was using their home equity lines to pull out money for all sorts of things. Well they appear to make a come back. Specially in states and cities that the real estate is rebounding there seems to be more activity with home equity loans. According to banks and financial institutions there seems to be a lot of movement in home equities in California, Arizona, Pacific Northwest and some of the Atlantic Coast States and Texas.

Of course this time around banks are much more careful and cautious in terms of lending out reasonable amounts and not letting people do things or reach limits they cannot afford and in fact many banks restrict total loan amount on any property to a maximum of 85% of the value of the property. Keep in mind during 2007 banks were lending up to 100% of a property’s value and that was when the problems got really out of hand. In fact in 2012 banks wrote off four and a half billion dollars in bad home equity loans.

When customers default and cannot pay their loan and go through foreclosure keep in mind whatever is recovered first pays the first mortgage so most of the time home equity loans are not paid back and become bad debts  that need to be discharged. Either way good news for customers home equity loans are becoming available though it is advised that customers should be be careful not to borrow amounts they cannot afford to pay back. And most banks are much more careful and only loan out carefully with a lot of provisions built in to protect the loans in case of issues.

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