The Mortgage Go To Guy!!

If you are a homeowner with a Home Equity Line (HELOC) in Florida you surely know that Bank of America and other banks are freezing  or shrinking your available funds.

In a response to the market drop and shareholder pressure, Banks have decided that the need to keep a handle on the extra debt that they are allowing on properties - no matter whether you have used your line or not.

Seems fishy??

I want to spend some time discussing how to address this issue but need to begin at the beginning.

First of all, this is a double edged sword. 

Banks are claiming that they are doing this to help the homeowners… but are they really helping Floridians who need those equity lines in case of unexpected repairs like a hurricane might cause?

Banks are claiming that consumer debt is high and this is protecting consumers… but if consumers have an equity line and use it instead of high interest rate credit cards, isn’t this just raising rates? 

I bet that nice banker at your local branch will still give you a shiny new credit card!!

Banks are also claiming that property values are shrinking and that they have new appraisals that say they should reduce the size of the HELOC…

Next… what to do if it happens to you…

Did they FREEZE your Equity Line or just CAP the funds available?  or both?

Just Capped??

If you have not been using the line, you just need to consider how much you will need down the road.   If you are planning a home improvement or a debt consolidation, then perhaps it is time to shop for a new equity line… and maybe a new place to do your banking. 

If you do, be picky and make sure not to fall for sales lines… just the facts.

Frozen??

If your line of credit is frozen entirely then that means that you are not allowed to use it except to pay the interest… and maybe even if you pay it down they won’t let you use more funds if you need them…

So what to do?? 

This is when you have to really get into the financial planning mode and figure things out.   

• Can you afford to pay down the Equity Line?
• Do you have High Credit Card Balances? (if so, you should pay them off first because the interest will be higher!)
• Are you in the middle of a home improvement?
• Do you have some other big expenses looming?

Once you have paid down your Equity Line, if the bank will not let you access the funds at all then change banks… plain and simple.  

You should be able to find another bank that can get you an equity line if you bring them all your banking.

Plus… once you’ve cleared up some of the burdensome debt, your credit should go up and help you qualify for the next loan!!

Email me today for more advice about how to deal with a frozen Equity Line! - david@themortgagegotoguy.com

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David A. Podgursky, MBA
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