Borrowers love to use their home's equity to pay the bills if you are laid off. But you have to take action while you still have a job.
There are two ways to extract equity from your home without selling it or refinancing the mortgage. One way is to get a home-equity loan -- a lump sum that you repay over a specified period. The other way is to get a home equity line of credit, which behaves like a credit card with a revolving balance. You draw against it when you want, like using a credit card, and as you repay the balance, the credit becomes available again. Traditionally, home equity lines of credit, or HELOCs, have been used to pay for periodic expenses such as multistage house renovations or college tuition. A line of credit can be a sound way of meeting normal living expenses, too, during a time of unemployment.
A lot of people are discovering the pain of unemployment. More than 400,000 people have filed jobless claims each week since early February. The national jobless rate climbed to 6 % in April, and it's 7.6 % in Oregon, the state with the highest rate. Many unemployed people dip into their savings, says Anthony Hsieh, president of HomeLoanCenter.com. "But if you don't have a cash savings account, you can draw from your home's equity, which is a form of savings," he says. Don't wait for a catastrophe.In unemployment, as in comedy, timing is critical. As Hsieh notes, credit is easily available when you don't need it and hard to get and expensive when you need it.
Information can be referenced at Bank Rate