No. of Recommendations: 0
I think you need SOME equity in your home, at least to borrow against it in times of emergencies, and to get you payments to a reasonable level.

One can borrow equity in times of need, but any equity over 80% LTV is more expensive to borrow.

For instance, if you have 30% equity in your home right now, you can borrow 10% of it at 4.75% (prime).

If you have 80% equity in your home right now, you can borrow 10% of it at prime + 1.875%--still relatively cheap--or the entire 20% at prime + [whatever you can find].

In other words, the more you juice your property, the riskier it is for the lender to lend it to you, thus the higher the interest rate and the more stringent the approval requirements.

Personally, I believe that everyone should put a HELOC (Home Equity Line of Credit) in place BEFORE they need it for the emergencies that Merrill is referring to. It usually costs nothing to put it in place if you know where to shop for one.

Catherine Coy
Mortgage Broker
Print the post  


Useful Resources
Our Home Center has all you need to make buying and owning a home a great experience. Get or refinance a mortgage and much more!
Buying/Selling a Home FAQ

Mortgage Professor
Offsite resource for mortgage questions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.