…”We are seeing more responsible uses today, like home improvements, education expenses or other major expenses that would be a more responsible use of a customer’s home equity,” Blackwell said. The average home equity line in October of 2012 was just below $90,000 compared to October 2006, when lines averaged just over $100,000, according to Equifax….
(emphasis added)
This isn’t very much less home equity than the average amount which was removed in 2006! But I do agree with spdrun that values aren’t likely to decline in the future in CA coastal counties (ESP the well-established areas) … don’t know about other parts of the US.
For a “free and clear” owner (or one with over 50% equity) on a property worth at least $450K, I can see borrowing for home improvements in areas in which sold prices will bear these investments. But I just don’t see the prudence of borrowing for educational purposes for child(ren) as it is likely to leave the parent close to or at retirement with an extra ~90K (+?) to pay back on their homes without the improvements to make their properties more salable for a higher price.
Due to the fact that many CA college graduates are now going to have to relocate to find work in their field that pays a living wage, should today’s parent expect their ex-student-children (whom they borrowed for) to help them pay back their HELOC while supporting their own families in other counties/states??
I don’t see this happening. Meanwhile, after college graduation the parent is likely 55-65 years old and often left behind without enough monthly income to keep the payments up on their adjustable-rate HELOC in a possibly rising-interest rate environment.
I suspect many parents are falling for this trap to keep their kids from taking out (the recently highly-publicized) non-dischargeable (variable-interest) student loans at a 6.5%+ (current) interest rate.
But this practice could very well leave THE PARENT(s) without a home when they are on a fixed-income and least able to pay for one, cuz I don’t see their kids coming to the rescue for them :=0
