When you got a home equity line of credit, what did you use it for? Many people use their HELOCs for home improvement projects and to — somewhat surprisingly to me — buy cars. This means that since mortgage lenders are showing a little more stinginess with the HELOCs, other areas of the economy are also being affected. Calculated Risk reports on the impact of HELOCs:
Although HELOCs were used for a variety of household expenditures,
probably the two most common uses were for new cars and home
improvements. It’s not surprising that these two areas are being
severely impacted as lenders sharply restrict HELOC borrowing.
One can understand that mortgage lenders are wary of HELOCs right now. There is a chance that you will be approved for a line of credit, and then find yourself upside down in your mortgage with negative equity.
This should also be a concern for you in terms of your personal finances. While HELOCs can be good ways to fund home improvements, I’m not very fond of them in terms of buying cars and going on vacations. And certainly not for taking unsecured credit card debt and turning it into debt secured by your home.