Updated: Mar 25
In recent months, homeowners have been turning to Home Equity Line of Credit (HELOC) as a means of accessing fast cash. HELOC allows homeowners to draw from the available equity in their homes, similar to a second mortgage. This access to cash has become increasingly critical in today's economic climate, where inflation rates and interest rate hikes have left many homeowners struggling to make ends meet.
The COVID-19 pandemic has impacted the US economy in many ways, including a significant increase in home values. This has resulted in homeowners having record levels of equity in their homes, with many choosing to use a HELOC to access cash for living expenses. However, for people who purchase a home in 2022, the enjoyment of opening a HELOC may not be the same as those who bought in 2021 or 2020.
One of the reasons for the rising popularity of HELOC is the soaring long-term mortgage rates, which have slowed the pace of refinancing to 70% of 2022 levels. Additionally, HELOCs offer homeowners flexibility in how much financing they want to buy versus taking out a 30-year loan on the house. This option has become attractive, especially when taking on additional and more expensive credit card debt.
HELOCs have been used for multiple reasons, including home renovations, which became more relevant as people nested earlier in the pandemic. However, with the fast inflation of the past year, many Americans have turned to their $29.6 trillion in home equity to cover basic living expenses.
Despite its convenience, homeowners should carefully consider the risks associated with HELOCs before taking on this form of credit. HELOCs work similarly to credit cards, with interest paid monthly on the amount of credit used. This means that homeowners could end up with large debts and high-interest payments if they are not careful.
Additionally, HELOCs can be unpredictable due to varying interest rates and fees. While the interest rates on HELOCs are currently low, they can increase over time, leaving homeowners with higher monthly payments than expected. HELOCs also have variable interest rates, which means that payments can change based on market conditions. Therefore, it is essential to carefully evaluate the interest rate and terms of the HELOC before committing to one.
The current economic climate is uncertain, and people who purchase a home in 2022 are at greater risk of being hit hard in an economic slowdown. With rising inflation rates and interest rate hikes, many homeowners are struggling to make ends meet, and accessing cash through HELOCs may not avaiable to recent home buyers with bought-down interest rates.
The good news is that there are other ways to save money that homeowners can explore. One such way is by appealing their property taxes. Property taxes can be a significant expense for homeowners, and appealing them can result in substantial savings. A property tax appeal involves challenging the assessed value of the property and can result in a lower tax bill.
Working with a firm like AOPTA The Property Tax Experts can be a valuable asset in this process. AOPTA has years of experience in property tax appeals and can help homeowners navigate the complexities of the process. AOPTA's team of experts can help homeowners gather the necessary documentation and prepare a compelling case for a property tax appeal. The savings from a successful appeal can help homeowners weather an economic slowdown and provide financial stability.
In conclusion, people who purchase a home in 2022 may not have the same access to HELOCs for living expenses as those who bought in 2021 or 2020. However, there are other ways for homeowners to save money and prepare for an uncertain economic climate. Appealing property taxes can result in significant savings, and working with a firm like AOPTA The Property Tax Experts can help homeowners navigate the process with confidence. By doing so, homeowners can find financial stability and peace of mind in uncertain times.
About the Author
Anthony O'Connor is owner and founder of AOPTA The Property Tax Experts with locations in San Diego, Los Angeles and Sacramento. AOPTA The Property Tax Experts, a firm focused on delivering consistent client service and exceptional results. With his wealth of experience and expertise, Anthony is poised to make a significant impact in the property tax industry and continue his track record of success.