Tapping out your home equity line — does it make sense?

October 18, 2008

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About a week ago I wrote a post titled “Home Equity Freeze-Out” in which I discussed the recent trend where banks are either reducing or freezing home equity lines of credit.  This change is catching many homeowners off-guard, since it is happening without any advance notice — the bank makes the decision, and then notifies you that your line has been changed.

Since I'm not a “financial advisor,”  I cannot make recommendations on how you should handle your home equity line of credit.  However, I can tell you that one option that many people are considering is to draw out a large chunk (if not all) of their home equity line, and put it into a liquid, interest earning account.  Essentially, they're borrowing the money before they may need it, and definitely beating the home equity lender to the punch.

There's a good article that came out in today's San Jose Mercury News that discusses the pros and cons of this maneuver.  I thought it would be useful to pass this on to you.  Click here for the article–>  Tapping Out Your Home Equity

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