Bank Freezing Your HELOC?

Word is that some banks in so-called “Declining markets” are putting the ice on homeowner’s home equity lines! And here is a chilling example…

Let’s consider a home owner that has a $100,000 equity line, but is only using $20,000 of the line. If the line is frozen,  this would eliminate the opportunity to use the other $80,000! And worse, their credit score or repayment history has nothing to do with it!

Some banks are running scared! They are afraid that if you live in a “declining market” that you will max out the equity line and skip town! In some cases that has actually happened! So what should you do if you have an equity line?

Well, with interest rates on HELOC’s becoming so low, some have suggested taking the equity out and depositing it into a high yield savings account or some other safe investment. You could actually MAKE money on the borrowed money while getting a tax break on the interest you are paying! When rates begin to climb again, you can withdrawl the money from the account to pay off the line and keep any interest earned for yourself! Those offering this idea suggest that its a win win situation. The mortgage company makes money on the interest charged to the line, you make money on the investment and the bank holding the investment account makes money on your money. Sounds like an interesting idea, doesn’t it?

Here in Charlotte, we are not in a declining market. Charlotte real estate is holding steady and still strong. However, one might want to consider an equity line advance invested correctly. Rates are very low on HELOC’s right now due to the lowered Fed rates, and with the right placement one could stand to make money on the situation! Of course, that assumes that one would talk to their financial planner about how and what to do!

Don’t have a certified financial planner? Send me an email or give me a call and I can give you a good referral.