One of the hallmarks of the housing bubble more than a decade ago was homeowners treating their properties like ATMs. Of course, when the value of their homes collapsed, they went bust and their homes foreclosed. It was a dangerous financial situation, and one that many Americans still haven’t learned from.
According to a new study by Bankrate.com, more than 24 million Americans are using their home equity to keep their heads above water.
The website found:
“Lower-income households — those earning less than $30,000 a year — were almost twice as likely to view home equity as a viable way to keep up with their household bills as those earning $50,000 to $74,999. And when compared with the highest-earning households, lower wage earners were more than three times as likely to consider tapping home equity to pay household bills.”
With rising debt levels and interest rates, many households have no other choice but to tap into their equity.
But this isn’t the greatest of options.
“Regular household bills should be funded by a regular household income, not home equity,” said Greg McBride, chief financial analyst at Bankrate.com. “Wage growth has been elusive, but rising household expenses have not. And now home equity is being seen as a lifeline for those who are strapped for money with little wiggle room.”
When rates go even higher – interest rates on home equity lines of credit (HELOC) are already at their highest in more than a decade – it is going to cripple households.
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