Your Home as an ATM

Americans Are Tapping into Home Equity Again
Excerpt:

Nearly 11 million borrowers are underwater on their mortgages, owing more than their homes are worth, according to CoreLogic, and yet home equity lines of credit are suddenly on the rise again. During the housing boom of the last decade Americans withdrew over $1 trillion in home equity. They did it through cash-out refinances, home equity loans, and home equity lines of credit. The latter allowed them to use their homes like an ATM. They spent the money on cars, televisions, vacations and fancy home upgrades. It was seemingly endless equity, until suddenly that equity was gone.

... With home prices up 8 percent year-over-year in December, according to the latest reading from CoreLogic, homeowners are regaining home equity at a fast clip-1.4 million borrowers rose above water on their mortgages through the end of September. That number likely increased as price appreciation accelerated toward the end of the year. Does this mean a return to the reckless equity withdrawals of the housing bubble? Likely not. "I would guess that most of the current home equity line borrowing is quite prudent. We know that it is being very conservatively underwritten with plenty of equity," said Guy Cecala, editor of Inside Mortgage Finance.

While it is too early to say exactly what borrowers are spending this new cash on, anecdotal evidence shows borrowers are largely sinking the money back into their homes. "We are seeing more responsible uses today, like home improvements, education expenses or other major expenses that would be a more responsible use of a customer's home equity," Blackwell said. The average home equity line in October of 2012 was just below $90,000 compared to October 2006, when lines averaged just over $100,000, according to Equifax.

Comment: Makes sense to use a HELOC for a home improvement. We have a HELOC and have used it once .... to do a quick cash buy on a car .... and then we paid it back in about 2 months.