8 Questions You Must Answer Before Tapping a Home Equity Loan

Are rebounding home values tempting you to use the equity in your house as an ATM? Ask yourself these questions first.

8 Questions You Must Answer Before Tapping a Home Equity Loan Photo (cc) by nikcname

home piggy bank photo

Photo (cc) by Images_of_Money

You may be snowbound now, but spring is around the corner. With home-improvement projects looming, anticipation of summer vacation growing or bills just piling up, many people are looking at how they’re going to pay for it all.

Rebounding home values may tempt many to view their houses as potential ATMs. Home prices, generally up since the Great Recession, rose 6.3 percent in the 12 months through November 2015, the Federal Reserve Bank of New York says.

While they’re tapping equity again, homeowners are being prudent, Todd Pietzsch, spokesman for BECU, Washington state’s largest credit union, said in an interview, echoing similar observations from around the country.

Although nearly 1 million homeowners in 2015 refinanced their homes to take out an average of $60,000 in cash, they didn’t borrow as much as they could have, says Black Knight, a financial services firm that analyzes mortgage data.

Financial experts say there are smart ways and dumb ways to use home loans. Let’s take a look at things you should ask yourself first.

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