• Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint
Share this Page URL
Help

Chapter 5. Home Equity Borrowing > The Dangers of Home Equity Lending

The Dangers of Home Equity Lending

Katy owned a nice house in a Los Angeles neighborhood where prices had been growing at a double-digit clip. But the rising value of her home wasn't making Katy wealthier. Instead, every year or so Katy would drain off her equity to pay credit card bills, replace her late-model car, or take a vacation. She thought she was being smart by taking on tax-deductible debt. Instead, she was blowing her most important asset with pretty frivolous spending.

Her borrowing got to the point where she had very little equity left. When she tried to refinance her home loans, she learned that lenders wanted to charge her much higher interest rates because her existing house debt already totaled nearly 100% of the value of her home. (You get the best rates on home equity lending if your total borrowing equals 70% or less of the value of your home; once you get to 90%, rates really spike.)


PREVIEW

                                                                          

Not a subscriber?

Start A Free Trial


  
  • Creative Edge
  • Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint