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U.S. homeowners took $49.6 billion in equity from their homes during the first quarter of this year, according to data from the Federal Home Loan Mortgage Corporation reported by the Wall Street Journal.
The total cashed out was the most since 2007, but short of the $84 billion owners extracted from their homes in 2006, the WSJ said.
Owners cashed in on rising property prices and low interest rates for a range of uses, including home improvements or adding space, the WSJ noted; some have refinanced their mortgage balances at lower rates, adding cash to the new loan.
In most cases, homeowners can take 80 percent of their equity as an additional loan.
For example, if you bought a home for $300,000, used $30,000 as a down payment, and have paid off $120,000 of the remaining principal, you would have $150,000 in equity and could take 80 percent of that amount, or $120,000, in cash for home improvements, children’s college tuition, or other uses.
TREND FORECAST: As the WSJ notes, if you do not use your equity cash for home improvements, you might not be able to take the interest you pay on it as a federal tax deduction, although you might be able to if you use the cash to start a business.
Always check with your accountant or tax advisor before taking equity from your home.
When equity markets crash, however, and the “Greatest Depression” crashes the economy, unemployment will spike, and it will be difficult for the deeply indebted to pay down their loans. And, once again, as homes go into foreclosure, the private equity groups and large corporations will buy up real estate and turn them into rentals. (See our 1 June article, “INVITATION HOMES TO BUY $1 BILLION WORTH OF HOUSES THIS YEAR.”)