RadioBDC Logo
Last Forever | Fenech-Soler Listen Live
 
 
< Back to front page Text size +

Do you have a home equity line? Beware!

Posted by Cheryl Costa  July 3, 2008 11:45 AM

E-mail this article

Invalid E-mail address
Invalid E-mail address

Sending your article

If you have a Home Equity Line in place for emergencies, or you are drawing against a home equity line gradually (perhaps because you are renovating your home in stages), you need to know that many homeowners across the US have recently had their lines frozen or cancelled. Often, this is occurring with little or no advance notification.

The Wall Street Journal recently ran a two-part series profiling several homeowners who had their home equity lines frozen unexpectedly. In one instance, a homeowner had his line cancelled in the middle of a huge renovation project and he had to use his IRA to finish the project because he had no other assets available to pay the contractors.

If you are tapping an existing home equity line in stages, you should be aware that something like this could happen to you. Usually, it is the larger banks that are freezing lines -- the article specifically mentions Bank of America, Citibank, Countrywide and Washington Mutual --and most of the freezes are related to a missed payment. However, even borrowers with stellar payment histories can be impacted if the value of their home has dropped dramatically since the line of credit was established.

If you are afraid that this might happen to you, you might want to consider withdrawing the full amount that you will need for a renovation or purchase all at once, in advance of starting a project. That way, you will know that the money is available. The downside to this strategy is that you will owe interest on the full amount withdrawn right away. If you had made withdrawals over time -- as your renovation progressed -- you would have paid less in interest charges. Alternatively, you might also wish to consider taking out a fixed rate home equity loan instead of a line of credit.

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

E-mail this article

Invalid E-mail address
Invalid E-mail address

Sending your article

ABOUT MANAGING YOUR MONEY
Local finance professionals share insights and advice on issues such as budgeting, managing debt, and retirement planning.

About the contributors

D. Abraham Ringer is a CERTIFIED FINANCIAL PLANNER practitioner and a Financial Adviser with Morgan Stanley Global Wealth Management in Boston. He is registered in MA, NH, NY and several other states to which his articles are directed. For more information please visit www.morganstanleyfa.com/ringer
Financial Planning Association™ of Massachusetts has 900 members who specialize in the financial planning process. Many of its members engage in philanthropic pro bono work in their communities, recommend legislation, elevate public awareness, promote financial literacy, and advocate for sound economic and tax policies.
Odysseas Papadimitriou is the founder of CardHub.com, a credit card and gift card marketplace, and WalletHub.com, a personal finance site. He has more than 13 years of experience in the personal finance industry, and previously served as senior director at Capital One.

E-mail your question

Name:
E-mail:
Your question/comment:
archives