What To Do When Home Equity Runs Out

Big single-family home

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It’s been said that Americans have been living at around 17% ABOVE their annual income over the past 10 years or so.  We’ve been doing this through borrowing, usually by credit cards then by paying-off those credit cards through a home equity loan, a second mortgage or a cash-out refinance.  Because of this, many American’s are now facing a situation where because of declining market values they can no longer tap their home’s equity to pay-off credit cards or other debt.  I feel this is also a reason for a slowdown in the economy because people are not spending above their cash-on-hand anymore.  But there are things that can be done to help in situations where equity is tapped-out.  Here is an article from the Wall Street Journal:

What To Do When Home Equity Runs Out

By Lynnette Khalfani-Cox A DOW JONES NEWSWIRES COLUMN

Declining real estate values and an inability to tap home equity are tough challenges for homeowners who previously counted on ever-escalating housing prices.

Unable to get home equity loans or do cash-out refinancings, many Americans are seeking strategies to lower their dependence on their homes as an asset or lower their monthly housing costs in general.

Fortunately, there are several ways to do both.

Buy a smaller home

Scaling back on the size of a home is the most obvious way to lower housing costs, and more Americans are doing just that.

According to a June report from the National Association of Home Builders, the average size of a new, single-family home built in 2009 shrank nearly 100 square feet to 2,438 square feet — which reversed a 30-year trend toward increasingly larger homes.

The upshot of smaller residences is that homeowners can typically expect to pay less for property taxes, insurance and utilities, as well as spend fewer dollars on furniture, decorations and other home-related expenses.

Read the rest of the article here: What To Do When Home Equity Runs Out – WSJ.com.

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