Next Housing Bubble? – Payments on Equity Lines Soon to Rise

bubble

Might the real estate market be heading for a new — and as yet little publicized — financial storm? Maybe.

Some mortgage and credit experts worry that billions of dollars of home equity credit lines that were extended a decade ago during the housing boom could be heading for big trouble soon, creating a new wave of defaults for banks and homeowners.

That’s because these credit lines, which are second mortgages with floating rates and flexible withdrawal terms, carry mandatory “resets” requiring borrowers to begin paying both principal and interest on their balances after 10 years. During the initial 10-year draw period, only interest payments are required.

But the difference between the interest-only and reset payments on these credit lines can be substantial: $500 to $600 or more per month in some cases. If borrowers cannot afford or choose not to make the fully amortizing payments that reduce the principal debt, the bank that owns the note can demand full payment and foreclose on the house if there is sufficient equity.

read more: http://www.washingtonpost.com/realestate/with-payments-on-equity-lines-soon-to-rise-real-estate-experts-fear-a-wave-of-disaster/2013/11/07/83dc9f3a-462c-11e3-b6f8-3782ff6cb769_story.html

Disclaimer:  for information and entertainment purposes only

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s