Your house is a bank?

House - bank

Mortgage interest rates have gone up a little from what has been an all time low. Some are even up over 4%. GASP! I can not help but remember all the years when they were over 8% and even over 15%.

However when rates go up fewer people refinance and that means that fewer loan officers have loans to work on which means their income goes down. Get ready for the post cards and mailers about how much you can borrow.

Last night I even saw an advertisement about how your home is your bank. Using home equity as a source of cash isn’t a bad thing. Especially when the money is used for a new roof or for that boiler you have always wanted. The interest rates are usually more favorable than they are on other types of loans and for some there is a mortgage interest tax deduction.

However there is some danger in treating a home like a bank, because it isn’t just a bank it is where you live and probably your most valuable asset. It wasn’t all that long ago that home values went down and millions of home owners ended up owing more on their homes than the homes could be sold for. Getting into a negative equity situation can lead to foreclosure.

There are numerous advantages in not borrowing money that should also be explored before withdrawing money from the bank of home equity.

Maybe I just have the post housing crash jitters. . . but please borrow responsibly. It doesn’t seem like the banks suffered because they lent money to people who could not pay it back but many former home owners did and still are.

 

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