HELOC Outstanding Debt Increases

[jeffrey]

It should come as no surprise that outstanding debt for home equity lines of credit has grown over the last year. These loans, which allow you to borrow against the equity in your home any time, for any purpose just by writing a check, are cheap, convenient and widely available.

Still, the numbers are staggering. According to Federal Deposit Insurance Corporation, the amount of outstanding debt in the form of home equity lines of credit, or HELOCs, was recently $416 billion at the end of the second quarter, up 41 percent from the same time in 2003. Meanwhile, homeowners still have a lot of equity to burn. Unused credit available recently totaled $435 billion, up 52 percent from a year ago.

"Homeowners have been pretty aggressive in tapping their home equity," said Richard A. Brown, chief economist for the FDIC. In 2003 alone, they tapped more than $300 billion of home equity via lines of credit and cash out refinancing, he said, or about 4 percent of personal income. "That's a big number."

In 2002 and 2003, "cash out" refinancing -- or borrowing more than the balance of the mortgage -- was a popular way to access home equity. During the second quarter of 2004, for example, 39 percent of all Freddie Mac-owned loans that were refinanced resulted in mortgage balances that were at least 5 percent more than the previous balance... [read more at money.cnn.com]