Home-equity lending is on the rise, as housing values increase.
But these loans are still relatively difficult to get. And even if you can tap your housing equity in this fashion, that’s a move you should make only under certain circumstances. It’s important to avoid the mistakes that so many homeowners made during the housing boom and bust, which left them devoid of equity—or worse, in foreclosure.
“Given that the equity in a home can be the largest retirement asset for many people, it’s a good idea to protect it as best you can,” said Keith Gumbinger, vice president of HSH.com, a publisher of consumer loan information. “Equity built through the regular pay-down of your mortgage takes a long time to build, and market-given equity—as in from a run-up in prices—can be ephemeral, as many have painfully learned in the recent price collapse.”
The statistics: New home-equity loan activity (including both one-time loans and lines of credit) rose 30.8% during the first nine months of 2013, compared with the same period a year earlier, according to data collected by Inside Mortgage Finance, a mortgage industry publication. Activity is still far below levels seen between 2001 and 2007, added Guy Cecala, chief executive and publisher of IMF.