Cell: 604-855-2521 |

Don't Turn Your House into an ATM!

~Don't Turn Your Home Into An ATM~

I am sure you have heard about Secured Lines of Credit. If not here is a quick explanation.

Let's assume that you own a house that has an appraised value of $300,000 but you still owe $200,000 on your first mortgage. That means that you have $100,000 in equity. Based on this information most banks will issue you up to a $65,000 line of credit with the interest rates as low as prime+1. That would be secured by the second mortgage on the title of the property. I know this sounds really good. I know that it would allow you to go for that dream vacation or to buy that car you always wanted...but watch out. It is really easy to spend the equity you worked so hard to create.

These secured lines of credit were originally designed for two reasons;
1. For emergencies.
2. To help us to increase the value of the property like renovations, additions and remodeling. Meaning take one dollar out and give yourself $1.25 back. They were not created to decrease the value of your property, and that is exactly what will eventually happen if you are not careful.

Lately I have seen many families using their homes as a personal ATM’s. For real life examples we don’t need to look very far. In the past few years our neighbors south of the border had a number of options to extract valuable equity out of their homes (Like subprime mortgages) to buy boats, SUV's and expensive trips, and look what happened to their Real Estate values.

So be cautious with the equity of your home. It is much easier to spend then to create!

Tibor Bogdan
 

Comments:
No comments

Post Your Comment:

The data relating to real estate on this website comes in part from the MLS® Reciprocity program of either the Real Estate Board of Greater Vancouver (REBGV), the Fraser Valley Real Estate Board (FVREB) or the Chilliwack and District Real Estate Board (CADREB). Real estate listings held by participating real estate firms are marked with the MLS® logo and detailed information about the listing includes the name of the listing agent. This representation is based in whole or part on data generated by either the REBGV, the FVREB or the CADREB which assumes no responsibility for its accuracy. The materials contained on this page may not be reproduced without the express written consent of either the REBGV, the FVREB or the CADREB.