Home Equity Loans Expensive While Purchase Loans Amazingly Low
Recently my buyers closed escrow on their home purchase with a 4.5% loan. Another couple to whom I just sold their first home are thrilled to have locked in a 4.625% mortgage. Meanwhile, if they had owned the home a few years and were looking for a Home Equity Line of Credit (HELOC), they would be paying close to 6% monthly interest, as of today. And, that is if they could get the loan.
Home equity loans are much harder to obtain because lenders have lost billions of dollars as foreclosures turn these uncollectable second mortgages into vapor. Even those who still have these credit lines have found their credit maximum severely reduced or even eliminated.
No wonder the U.S. economy is staggering. For years, homeowners used their HELOCs like a piggy bank – withdrawing money for trips, flat screens, you name it. Those days are over, at least for awhile.
For a more detailed explanation, go to “Home Equity Loans an Endangered Species.”