Home equity lines of credit dried up during the housing collapse, but the emergency cash is making a comeback.
Higher home values have restored hope to thousands of South Floridians, particularly those who owed more than their properties were worth. Now many are tapping newfound equity to finance home repairs, college costs and other major expenses.
Lenders report a steady increase in business. Bank of America said interest in equity lines jumped 50% across Florida in 2014 compared with 2013.
PNC Bank said its home equity lending in Broward County soared 66% last year over 2013. PNC's home equity loans rose 13% in Palm Beach County during the same period.
At Tropical Financial Credit Union in Miramar, home equity loans jumped 35% over the past two years compared with 2011 and 2012.
"It gives people a little more comfort to know their house is in position to have equity if they need it," said Sandy Robertson, Bank of America's regional president of home loans in Florida.
"Before, there was no equity to tap into," added Doug Leever, mortgage sales manager at Tropical. "Now people have a safety net again."
All Amy McGraw wanted was to stop having to pay private mortgage insurance. To do that, she needed an appraisal to show she was financing less than 80% of the value of her house.
The Weston resident was stunned to learn her three-bedroom home on a cul-de-sac was worth $358,000, shooting up more than $100,000 in a year.
Not only was she able to ditch the private mortgage insurance payments, she also took out a home equity line to replace the old tile floor and the white, laminate kitchen countertop with a hole burned through it.
"I still don't cook, but my husband and daughter are more than happy to do that now because it's a much happier place," said McGraw, 48, Tropical's marketing manager.
A home equity line of credit, or HELOC, is a second mortgage that allows borrowers to draw cash up to a specific limit, and they use the equity in their homes as collateral. In the housing boom of 2000 to 2005, homeowners leveraged their equity to make major repairs or to even take vacations.
When values plunged, many homeowners who took out home-equity lines found themselves "underwater" on the mortgages. The price declines were so steep that some banks froze access to the credit without appraising properties or reviewing the borrowers' credit histories.
In many cases, the credit remained frozen and the time to draw on that money expired. Those borrowers are reapplying for new credit lines and having to qualify based on their current financial picture.
"Some of those credit lines were five, six, seven, eight years old," Leever said.
The home equity that disappeared eventually started to return following sharp increases in values during 2012 and 2013, changing the outlook for many formerly frustrated homeowners.
At the end of the third quarter, 64,273 owners in Broward County were "underwater" on their mortgages, but that was down 36% from a year ago and 60% from the peak in late 2011, according to real estate website Zillow.com.
In Palm Beach County, 43,630 homeowners still had underwater mortgages in the July-through-September period, a 33% slide from a year earlier and a 58% drop from the 2011 peak.
But credit counselors say just because homeowners have equity again doesn't mean they have to use it.
Kevin Maher, community outreach director for the Debthelper.com counseling agency in West Palm Beach, said homeowners should take out equity lines to finance home repairs only if the improvements will enhance the value beyond the added debt.
Using home equity to pay off high-interest credit-card bills generally is a bad idea because most homeowners don't change their spending habits and end up accumulating more credit-card debt, Maher said.
He also advises borrowers to be careful of interest-only lines in which they don't pay down the principal amount.
"You're really rolling dice whenever you mess with your home equity," Maher said.
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