I meant to post this weeks ago, but got really sick and forgot all about it. Inside sources tell me that the lenders are going to be freezing your lines of credit. What this mean is, if you have a HELOC (Home Equity Line of Credit) or any other LOC (Line of Credit), whatever balance you have open now will become the MAX you can access. So, if you have a $100k HELOC, and have only tapped $10k, the rest of the $90k will now become unavailable. This is obviously an attempt to keep the lenders from being over leveraged on properties. What I’m advising people to do is to yank out as much as you can NOW, and then use it to capitalize on our strong buyer’s market. You can easily get a great return on that money, and it’s powerful to use for purchasing property! Countrywide has already frozen all of their LOCs- and I’m sure the rest will follow suit. Will you take advantage of the opportunities here???
Well I just deleted a derogatory comment by a visitor, as I don’t tolerate that on this blog. However, I will address his remarks. Many SMART investors use lines of credit, credit cards, loans, etc to obtain a higher, better return on their money. So if you were to utilize a LOC at 8% interest for an investment that returns 30%, wouldn’t you consider that a smart thing to do? I’m not suggesting to yank out your equity and go buy a $70,000 car you couldn’t otherwise afford. However, if you use that equity for a bigger, better investment, doesn’t that make sense?
Put it this way- some people will go sell their homes to get to their equity. Then they take their profits (what about Capital Gains?) and use it for a larger investment, like commercial property, land, another business, etc. That’s one way. Others choose to keep their homes, tap into their equity and still use it for a bigger investment opportunity. That seems much easier and smarter to me, and I’m not even addressing the tax benefits in that method.
So yes, while you may not be ‘deep in debt’ as you remarked, you may not be utilizing your equity to your advantage. It’s that kind of scarcity mentality that will never provide you the abundance of opportunities available out there.
I wish I had read this sooner. Now I am in the middle of renovation and have no more credit line. I understand where bank is coming from but just because they lost a lot of money from loosely lending money before now for people are legit to pay their debt are suffering….