Legal Bonds: Home Equity Lines of Credit May Not Be Your Friend!
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Furthering the discussion on whether the credit agencies are using a flawed algorithm to determine our mortgage future, this comment from Dallas bankruptcy attorney Reed Allmand, Allmand Law, deserves its own post. Most homeowners who are underwater on their mortgages got there through home equity loans that Allmand says were used to retire the same type of debt you find on credit cards. And that is what got so very many people into a financial mess. Me, I remember Texas when you could not borrow one dime against your home to protect the homestead:
I disagree with the premise that the Experian algorithm is flawed by classifying a Home Equity Loan as a Consumer Credit Loan. Before the state legislature changed the law to allow Home Equity Loans, the only type of debt that could impair a homestead was a purchase money loan (a traditional mortgage loan), a mechanic’s/materialman’s lien, child support lien, or a IRS tax lien. The argument for allowing home equity loans was to allow consumers to cash out the equity in their property and encumber their homestead with a new debt so they could use the proceeds as they please.
The consumer then uses home equity loan proceeds to make consumer purchases or retire other debt. Unlike a purchase money loan (traditional mortgage) the consumer is not borrowing money to pay off a piece of real estate and build equity in that property. Instead, they are cashing equity in a piece of property to make consumer purchases. This most often is a sign of economic instability in my line of work.
I am a Board Certified Consumer Bankruptcy attorney and I have seen too many clients enter into a home equity loan they should not have. Many times these loans are used to pay off credit card debt. If the consumer had not paid off the credit card they might go into default and possibly be sued but they could not have their home foreclosed on. That is not the case when a home equity loan is used to pay off credit cards, because if the consumer defaults on the home equity loan payments they are subject to foreclosure. I have counseled many clients in this situation and would definitely advise consumers to think twice before getting a home equity loan.
Reed Allmand is a board-certified Dallas bankruptcy attorney and principle at Allmand Law.
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I would suggest that Mr. Allmand is starting with an invalid premise when he assumes that all fundings from home equity loans are used to retire credit card indebtedness,
Certainly SOME home equity loans are used for this purpose.
Many, however, use all of the proceeds to improve one's peraonal residence by remodeling or updating that home. I suggest that this is not a case of fritterina away capital.
Another very commonly used application for proceeds from a home equity loan is to pay tuition for children to attend an outstanding private school in cases in which the local public school has outcomes below what the parents' asperations for their children are.
While the latter application may not add one fathing of value to the family residence, it most likely will allow those children to reach a higher level of their own personal potential and thus stand a far greater chance of absolute independence when they become adults. As they observe theit peers moving back into their childhood bedroom to live with the parents, many may feel that they wished that they had become more productive and thus better able to secure a job which would allow more independence/.
I would suggest that Mr. Allmand is starting with an invalid premise when he assumes that all fundings from home equity loans are used to retire credit card indebtedness,
Certainly SOME home equity loans are used for this purpose.
Many, however, use all of the proceeds to improve one's peraonal residence by remodeling or updating that home. I suggest that this is not a case of fritterina away capital.
Another very commonly used application for proceeds from a home equity loan is to pay tuition for children to attend an outstanding private school in cases in which the local public school has outcomes below what the parents' asperations for their children are.
While the latter application may not add one fathing of value to the family residence, it most likely will allow those children to reach a higher level of their own personal potential and thus stand a far greater chance of absolute independence when they become adults. As they observe theit peers moving back into their childhood bedroom to live with the parents, many may feel that they wished that they had become more productive and thus better able to secure a job which would allow more independence/.
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[…] here:Second Mortgage Settlement, Reduce Second Mortgage Mouse here forRelated LinksRelated LinksLegal Bonds: Home Equity Lines of Credit May Not Be Your Friend!Related PostsDo You Need a Second Mortgage?Aspen Real Estate Fleisher Provides Qualified Carbondale […]
[…] here:Second Mortgage Settlement, Reduce Second Mortgage Mouse here forRelated LinksRelated LinksLegal Bonds: Home Equity Lines of Credit May Not Be Your Friend!Related PostsDo You Need a Second Mortgage?Aspen Real Estate Fleisher Provides Qualified Carbondale […]
[…] here:Second Mortgage Settlement, Reduce Second Mortgage Mouse here forRelated LinksRelated LinksLegal Bonds: Home Equity Lines of Credit May Not Be Your Friend!Related PostsDo You Need a Second Mortgage?Aspen Real Estate Fleisher Provides Qualified Carbondale […]
If you're in need of cash and have a home you can raise what you need by getting a home equity loan. If you need even more than that then you should look into a 100% home equity loan. What's that?
Visit : http://100-home-equity-loans.blogspot.com
If you're in need of cash and have a home you can raise what you need by getting a home equity loan. If you need even more than that then you should look into a 100% home equity loan. What's that?
Visit : http://100-home-equity-loans.blogspot.com
[…] you if you want to use the equity you have invested a long time building up in your residence.A house equity loan is a loan that is primarily based on the difference in between the assessed appe…re cards as the curiosity rates presented for home equity loans are typically reduce than these […]
[…] you if you want to use the equity you have invested a long time building up in your residence.A house equity loan is a loan that is primarily based on the difference in between the assessed appe…re cards as the curiosity rates presented for home equity loans are typically reduce than these […]
[…] period of 30 – 60 days after you purchase before you can get a HELOC.Powered by Yahoo! AnswersCarol asks…Is it best to pay off a debt before applying for a loan?I am trying to get a 15,000 dol…div>Is it best to pay off a debt before applying for a loan?I am trying to get a 15,000 dollar home […]
[…] period of 30 – 60 days after you purchase before you can get a HELOC.Powered by Yahoo! AnswersCarol asks…Is it best to pay off a debt before applying for a loan?I am trying to get a 15,000 dol…div>Is it best to pay off a debt before applying for a loan?I am trying to get a 15,000 dollar home […]
I would suggest that Mr. Allmand is starting with an invalid premise when he assumes that all fundings from home equity loans are used to retire credit card indebtedness http://cystinose.org/
I would suggest that Mr. Allmand is starting with an invalid premise when he assumes that all fundings from home equity loans are used to retire credit card indebtedness http://cystinose.org/