During these uncertain financial times, many Austin residents are struggling to meet their financial commitments. They may be turning to traditional sources to tap to come up with enough cash to meet their living expenses.
Home equity is one source of funds for homeowners to use in a financial pinch. However, according to an article in The Washington Post, some homeowners have discovered to their dismay that they have been locked out of accessing their equity.
How can that be?
In the fourth quarter of last year, Americans collectively had more than $6 trillion in “tappable equity.” That term refers to the available funds that can be borrowed by homeowners before they max out at 80% of the value of their property. Typically, lenders cap the equity that homeowners may borrow on a first and subsequent mortgages and loans at that percentage.
In early spring, some major lending institutions like Wells Fargo and JP Morgan Chase quit taking home equity loan and line of credit applications from their customers. That means that while you legitimately may have equity built up, you may at least temporarily be barred from accessing it in a financial pinch.
Lenders wary in chaotic times
When the economy gets shaky, lenders understandably tighten their belts as well. They may do things like raise the bar for the acceptable credit scores they will accept for loans. They also disqualify borrowers who currently are furloughed from their jobs.
Options for relief are narrowing
Depending upon the state of your finances, you may be able to ride out the current economic storm with a little creativity. Taking on second or even third jobs, borrowing informally from family and friends, selling possessions and downsizing are all viable ways to increase your cash flow and reduce your expenses. For some, that may be sufficient to get them through the next few tumultuous months until the economy stabilizes.
For some debtors, however, it may be a case of too little, too late, to save them from potential financial ruin. Now, more than ever before, may be the time to seriously consider your options for filing for bankruptcy. Filing for Chapter 13 can allow you to keep your home and pay back a portion of your debts over time.