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Not necessarily. Home Equity Lines of Credit (HELOC) are a thing. My admittedly overly simplistic understanding is that the higher the valuation of your house,
by somerandomqaguy 3y ago
Not necessarily. Home Equity Lines of Credit (HELOC) are a thing. My admittedly overly simplistic understanding is that the higher the valuation of your house, the higher line of credit you can borrow against it, thus the incentive to keep valuation high even if it's unrealized.
- djbusby 3y agoIt's not just the valuation of the house it's debit to equity. In a $100k home where you owe $80k the HELOC would be like only $10k - and the rate would be less good. In the same home where you owe $20k (have $80k equity) you could borrow $50k at a better rate.
- DonsDiscountGas 3y agoThey would still need to pay back the HELOC using actual cash, not unrealized gains from estimated home value. Seems like an extremely small benefit.
- compiler-guy 3y agoA large part of the 2008 housing crash in the US was driven by HELOCs where the borrower ended up not being able to repay or refinance. Such loans can be a good way to access the value of the home, but only at the expense of reduced consumption while paying the loan off or reduced payout when it finally selling.