As the economic impact of the COVID-19 coronavirus pandemic continues to intensify as time goes on, the ability for Americans to access the equity in their homes has only gotten more complicated and even problematic. This is according to housing experts and data analysis appearing this week in the Washington Post.
While as many as 25% of American homeowners were considered “equity-reach” during the first quarter of 2020, but the ability for many of them to access that equity has become considerably more difficult as the year’s challenges have both persisted and intensified.
“As a country, we’re equity rich, but the tightened credit box has locked many people out of the ability to access that equity,” says Nicole Rueth, producing branch manager for Fairway Independent Mortgage Corp.to the Post’s Michele Lerner.
This problem has been exacerbated by the recent exit of some larger institutions — like JPMorgan Chase and Wells Fargo — from the Home Equity Line of Credit (HELOC) lending space.
“Banks are thrilled to lend you money when you don’t need it, but not when you do,” according to Brian Sacks, branch manager with Homebridge Financial Services in Pikesville, Md. to Lerner.
While some options do still exist for some homeowners to unlock their homes’ equity, the right tactic in going about that task makes all the difference according to financial experts who spoke to the Post. A cash-out refinance can be one possible solution and a HELOC can provide a safety net for those already with savings, but another option can be a reverse mortgage under specific circumstances.
“A reverse mortgage is right for the right situation and wrong for the wrong situation,” says Sacks to the Post. “A common misconception is that the bank takes the house at the end of the loan. But when the borrowers no longer live there and there is equity left, they can sell it and keep the equity or their heirs inherit it.”
Read the story at the Washington Post.