A Home-Equity Line of Credit
Can Be Your Safety Net
by Emily Green
From The Wall Street Journal Online
March 18, 2008
Now is the time to consider a home-equity line of credit if you haven't already. Think of it as a safety net -- one that could be particularly valuable in a weakening economy.
With a home-equity credit line, you can borrow up to a specified limit, as you can on a credit card; in this case, the maximum is based on the equity you have in your home. You can borrow a lump sum or in small increments or never use the credit line.
Why bother signing up now? To increase the resources you could tap in a financial pinch, such as if you or a family member loses a job. The faltering economy means more people are going to lose jobs -- and obtaining credit, if you need it, after that happens will prove very difficult and maybe impossible.
To be sure, with home prices falling and lenders tightening their credit standards, you may not be able to borrow as much or as easily as you could a year or two ago. Also, many people have already tapped their equity by refinancing with larger loans.
But there are still many longtime owners whose homes are worth far more than the amount of any mortgage debt.
And you won't be penalized if you never tap your home-equity credit line. You only pay interest if you actually borrow. At many institutions there are no fees for opening a credit line, but be sure to check the fine print at the lenders you're considering.
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