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The HELOC Paradox

The residential real estate landscape has changed dramatically over the past few years. 

According to Bloomberg.com, almost 40% of US homeowners own their homes outright. Additionally, Redfin calculates that of those homeowners with mortgages, almost 60% have a rate below 4%. 

With home values near record highs in many parts of the country, these findings point to an interesting situation. Not only is there a tremendous amount of home equity being stored up, but that equity is quite expensive to tap into. 

Currently, Bankrate.com reports the interest rates for a home equity line of credit (HELOC) at between 8.64-10.72%. 

Herein lies the paradox. Not only are many families feeling "handcuffed" to their homes because they can’t or won’t walk away from an extremely low interest rate, but a vast amount of household wealth is essentially locked away due to the high cost of tapping it through a home equity line of credit (HELOC). 

We view this as just one more example of the growing list of unintended consequences of having artificially low interest rates after the financial meltdown in 2008/9.

These are our opinions and commentary only, as of the date of publication, and that these opinions are subject to change without notice.