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Homeowners Tapping Into Equity Once Again
Homeowners are tapping into their equity once again. Over the last decade there was over $1 trillion in home equity withdrawn. Many homeowners did this through home equity lines of credit, cash-out refinances, and home equity loans. Much of that money was spent on home upgrades, flat screen TV’s, cars, and vacations. And, while there are nearly 11 million homeowners still underwater, it is not stopping home equity lines of credit from being on the rise.
The rise of home values have helped attribute to home equity lines of credit. As home values increase, homeowners will have more equity to play with. Consumer confidence has also helped homeowners feel better about repaying loans. So, because of these two factors, we have seen a 19% jump in home equity lines of credit.
Now that home prices are up by 8% since December 2012, homeowners will see a quick gain on home equity. Over 1.4 million borrowers are now above water on their mortgages. So, does this mean we will start seeing reckless home equity use again? Probably not. It’s now a little harder to pull the equity out, but those who are able to seem to be reinvesting it back into their home.
To show some actual numbers in home equity use, there was $28 billion in home equity used in 2006 and only $7.2 billion used in 2012. Of course the numbers are expected to go up in 2013 as interest rates and home values rise. However, cash-out refinances are expected to stay low. Most homeowners will turn toward home equity lines with a fixed rate. Some banks are now offering lines of credit with a fixed rate for up to 3 years. Others are still offering a variable rate.
If you would like more information about current mortgage or real estate trends, contact Tom & Bev Herring – your real estate resource for Tulsa, OK and surrounding communities.
How Distressed Homeowners Can Start Fresh
More and more distressed homeowners can start fresh as banks try to keep foreclosures off the market. It’s called artificially driving demand but it works, and now many sellers can rest assured that they will get a good price for their home. Therefore, we have some tips on how distressed homeowners can start fresh too.
How distressed homeowners can start with a fresh slate:
Sell and get out – For homeowners who have saved and scrimped to get through the recession, the current market may present a better opportunity. You can sell or short sale your property to get out of your rut. And, now that the economy is beginning to turn around, you may not be as upside down on your mortgage as you once were. Banks are moving short sales quickly and efficiently now. The income tax exemption on debt forgiveness on short sales will also be valid through the end of the year.
Settle old scores – If you had to foreclose on your home that had a second mortgage, you could still owe a lingering debt. However, many second mortgage holders are not actively collecting debts, but that debt will stay on your credit score until paid. Therefore, you should contact the servicer of your second mortgage and see if they will settle with a lower payment. Be sure to check your credit score once you pay off the debit to make sure it is no longer showing up as delinquent.
Dispute expired derogatories – If you foreclosed on your property in 2005 or 2006, your credit report will need to be checked to make sure the expired debt has been removed. If the seven year time frame has run out and the debt is still on your credit, you can have it disputed to have it removed.
Lock in low rates with refinance – Many homeowners lost the value of their homes during the recession and if you were one of them you can refinance your home to take advantage of the lower rates. Now is a great time to save on your monthly payment.
Tom and Bev Herring – Your real estate resource for Tulsa, OK and surrounding communities.
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Contact Information
Tom & Bev Herring Bev, GRI, CRS
Tom, Broker Associate, ePro
Tulsa, OK 74133
Business: (918) 712-4405
Fax: (918) 712-4333
