|By Paul Owers, Sun Sentinel|
Higher home values have restored hope to thousands of South Floridians, particularly those who owed more than their properties were worth. Now many are tapping newfound equity to finance home repairs, college costs and other major expenses.
Lenders report a steady increase in business.
"It gives people a little more comfort to know their house is in position to have equity if they need it," said
"Before, there was no equity to tap into," added
Not only was she able to ditch the private mortgage insurance payments, she also took out a home equity line to replace the old tile floor and the white, laminate kitchen countertop with a hole burned through it.
"I still don't cook, but my husband and daughter are more than happy to do that now because it's a much happier place," said McGraw, 48, Tropical's marketing manager.
A home-equity line of credit, or HELOC, is a second mortgage that allows borrowers to draw cash up to a specific limit, and they use the equity in their homes as collateral. In the housing boom of 2000 to 2005, homeowners leveraged their equity to make major repairs or to even take vacations.
When values plunged, many homeowners who took out home-equity lines found themselves "underwater" on the mortgages. The price declines were so steep that some banks froze access to the credit without appraising properties or reviewing the borrowers' credit histories.
In many cases, the credit remained frozen and the time to draw on that money expired. Those borrowers are reapplying for new credit lines and having to qualify based on their current financial pictures.
But the home equity that disappeared eventually started to return following sharp increases in values during 2012 and 2013, changing the outlook for many formerly frustrated homeowners.
At the end of the third quarter, 64,273 owners in
But credit counselors say just because homeowners have equity again doesn't mean they should use it.
Using home equity to pay off high-interest credit-card bills generally is a bad idea because most homeowners don't change their spending habits and end up accumulating more credit-card debt, Maher said.
He also advises borrowers to be careful of interest-only lines in which they don't pay down the principal amount.
"You're really rolling dice whenever you mess with your home equity," Maher said.
Powers@sunsentinel.com, 561-243-6529 or Twitter @paulowers
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