Home equity lending through banks is making a comeback for the first time since the housing crisis, according to a Seattle Times report this week. But, the report finds, the new home equity lending is not going to be quite like home equity lending of the past.
“Banking and credit analysts say the dollar volumes of new originations of home-equity loans are rising again — significantly so in areas experiencing post-recession rebounds in property values,” the report states. “…Unlike during the credit-bubble years of 2003-06, however, they aren’t permitting owners to go whole hog — mortgaging their homes up to 100 percent of market value with first, second and even third loans or credit lines.”
Areas that are seeing volume pick up include Atlantic coastal states, the Pacific Northwest, California, Arizona, new Mexico Texas and some parts of the midwestern United States, the Times writes.
There are certain new stipulations home equity borrowers and second mortgage applicants will face, including a restriction on the combined loan to value ratio of the two loans, which most lenders are capping at 85%, the article states. Further, some areas and lenders are including add-ons in an effort to protect the lender, but will raise costs to the borrower.
“Bottom line: If you’ve got equity in your house, have a need for cash in a lump sum or credit line and can get through the underwriting hoops and snares set by loss-leery lenders, go for it,” the article writes. “Rates are low and the bank windows are opening again…Just not as wide as they once did.”
Read the full article at Seattle Times.
Written by Elizabeth Ecker