With home values rising, more Americans have equity in their homes. That has generated plenty of cheers from homeowners, and it’s also brought back the home equity line of credit as a popular option for the first time since before the Great Recession. Americans took out $23.4 billion in home equity lines in the first quarter of 2014, up 15.5 percent from 2013 and the highest number in six years, according to Equifax, a credit reporting agency.
If your mortgage is less than 80 percent of your home’s value, you might want to join that group. But the greatest lesson of the recent real estate boom and bust is that turning home equity into cash is best done with great care. “The mortgage mess and the real estate recession gave us some really good lessons in how home equity lending could go bad,” says Liz Weston, a personal finance columnist and author of “Deal with Your Debt: Free Yourself from What You Owe,” and other books. She cited a 2011 CoreLogic study that found that borrowers with home equity loans or lines of credit were significantly more likely to owe a larger amount than their homes were worth.
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