Home Equity – Foreclosure Often Not Necessary in Current MarketWritten by Charles Essmeier
While driving around your community, you may have seen signs posted on telephone poles that offer “foreclosure help.” These seemingly generous offers to help financially troubled homeowners who are in danger of losing their homes to foreclosure are actually scams. Typically, “help” comes in form of an offer to buy home for a reduced price from homeowner. The scammer offers to pay off homeowner’s existing debt and to rent home back to homeowner until they can afford to buy home back. The scam comes after owner signs paperwork and offer to rent home to them abruptly disappears, leaving scammer with an inexpensive house and homeowner without a house or a place to live. Fortunately, current booming real estate market has made it possible for financially troubled homeowners to avoid foreclosure on their home and scammers.
Foreclosure usually occurs after a homeowner fails to make his or her mortgage payments for a period of several consecutive months. Lenders are often willing to accommodate minor financial troubles from their borrowers, but sometimes, they have no choice but to evict homeowner and sell home. This is usually done at a public auction, as lenders place more importance on getting money back quickly than in getting highest price property can yield. While national foreclosure rate has been fairly steady, it has been increasing in several states, notably Texas and Florida.
Home Equity – Don’t Spend it on Risky InvestmentsWritten by Charles Essmeier
The housing market has exploded in last five years, and homeowners are finding that equity in their homes is greater than it has ever been. The equity in a home is difference between market value of home and amount still owed on it. As home prices increase, so does equity for those who own their homes. In parts of California, home values have tripled during last five years, and homeowners are doing increasingly risky things with their newfound “wealth.” Anyone considering borrowing against their home’s equity should carefully consider possible pitfalls of doing so.
Traditionally, most home equity lending was done for purposes of home additions or remodels. These have been considered low-risk loans, as house is collateral for a loan that improves house itself. As a bonus, improvement usually increases value of home, making loan even safer for lending company. Occasionally, homeowners default on such loans, but foreclosed property can easily be sold to recoup loss. Times have changed, and many, if not most, home equity borrowers are now using money for different, and riskier purposes.
Thousands of people who have suddenly found themselves with hundreds of thousands of dollars of equity in their homes are treating that value as a windfall of cash. Instead of traditional uses, such as home improvements, borrowers are using their equity to buy more real estate to use as rental property. There are cases of individuals with homes valued at several hundred thousand dollars who have borrowed against