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Many Left Asking 'Can I Get a Home Equity Loan?'

By Nathaniel Hutchinson
KingofHowTo.com Business and Financial Expert

11/07/2011


In the past, when homeowners faced adverse financial circumstances, they relied on home equity loans to help them deal with unexpected expenses. Unfortunately, despite paying on their mortgages for several years, many have seen their home equity diminish due to a struggling real estate market that only seems to be getting worse.

A new report from the real estate research company, CoreLogic showed that home prices fell another 1.1 percent toward the end of September; as a fresh batch of foreclosures finally pushed their way through the judicial system and added to an already overloaded housing market.

According to CoreLogic chief economist Mark Fleming, home values are falling to correct for imbalances in supply and demand, and he says he expects even steeper declines in property values in the near future. He also blamed distressed sales for adding downward pressure on home prices, and, with more foreclosures scheduled to hit the market by the end of this year, things may only get worse.

Can I get a home equity loan?

More housing inventory is typically bad news for those seeking home equity loans, because the wide availability of cheap housing tends to push property values lower. For instance, if you originally secured a 30-year mortgage loan on a $300,000 home, and have paid on your mortgage for ten years, you could expect the current balance on the loan to be around $200,000. Unfortunately, this doesn't necessarily mean that you've accrued 33 percent equity in the property.

If the value of the home has also decreased by thirty percent, then you actually own no equity in the home, despite paying on the property for a decade. In this case, you're not going to be able to secure a traditional home equity loan from a lender no matter how good your credit is.

Some lenders may be willing to work with you if conditions are just right, and it may pay to do some research and/or have a telephone conversation with a representative. Likewise, although average home values are on the decline nationwide, they may actually be decent in your specific area. There are a host of factors that help determine property values, and these are often unique to each individual state, city, county and neighborhood.

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