Debt Consolidation and Credit Card Counseling

The real estate boom of the last five years has created a lot of “paper wealth” amount consumers. In some parts of the country, housing prices have tripled in five years’ time, and that has provided a lot of longtime homeowners with dramatically increased equity in their homes. If they should sell, or borrow against the value of the property, they would have access to a lot of cash. This can be quite convenient, as borrowing against home equity has all sorts of uses, from remodeling the home to consolidating debt to buying second homes. It seems like a great situation and homeowners can sleep well at night, knowing that the value of their home is there to protect them if something should go wrong in their lives.

Making such assumptions may be a mistake. Sure, the value of the home is there, and yes, you can borrow against it. The folly comes not in assuming that you can borrow against your equity, but in assuming that you can borrow against your equity any time you like. That, unfortunately, is not true.

Suppose that you lose your job or find yourself unable to work as a result of an illness or accident. Suppose, for instance, that you find that you will not be able to work for a year.  “That’s OK”, you might think. “I have home equity. I can borrow against that and live off of the loan until I am well.” That may work just fine in theory, but in practice, you may find yourself with a problem. The problem is that no lender is going to lend money to you, even against your own property, if you have no income. After all, lenders want to get their money back, and if you don’t have any income, then they have no reason to think that you can repay.

How do you work around such a problem? You plan ahead by taking out a line of credit, or HELOC, before you need one. A line of credit isn’t a mortgage so much as a source of funding that you can draw upon when needed. You can apply for the credit line today, when you have no need for money, and know that the money will be available for you later should you ever need the cash in a pinch. A line of credit, rather than the equity itself, is the true insurance policy against some sort of financial problem in the future. The interest is tax deductible and as long as you don’t actually borrow any money, you don’t have to pay anything back. It just sits there until you need it.

Plan ahead. Consider taking out a credit line.

If you have a mortgage with a high rate of interest, you may need to consider refinancing your mortgage. You may combine your If you have a mortgage with a high rate of interest, you may want to ponder a new loan. You could combine your debts and lower your monthly loan payment. Ameriquest can make it easier to refinance now.

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