All one needed to was to refi and become rich again. Now those who did have no equity left. The portion that was not spent has disappeared with the falling property values. The lucky ones are not underwater, the unlucky ones have nothing left to show. Sometimes it is hard to tell which is which. In today's example from Boonton, the financial future of the property owner will probably depend on whether they were in HELOC heaven (or at least just a bit) or just took out the HELOC for a safety net. If they indulged they will be bringing a check to closing - if they abstained (and how many really did???) they will walk away with a little more than their original investment. Well, lets take a look -
Here is the property -
Here is the property info -
Here are the financials -
- The property was purchased in June 2003 for $570,000.
- The first mortgage originated with the home purchase in June 2003 for $456,000 with Countrywide Financial.
- A second mortgage was signed the same day for $57,000 with Countrywide Financial.
- A HELOC was opened in August 2004 for $75,000 with Provident Bank.
- The property is currently listed with a realtor for $619,000.
Now the big question is how much of the HELOC was utilized. If the sellers were in HELOC heaven (or just visited entirely the one time) they will stand to lose $6,140 if the house sells for full asking price and the realtor receives the standard commission. If the HELOC was only opened as an emergency (not the vacation, new car, new clothes, coach purse type of emergencies that were common during the bubble) the homeowners will walk away with $68,860. That is just $11,860 more than the original downpayment. Not great but at least not a loss.
So the economic future the homeowner now depends on how much of that HELOC was touched. And boy were HELOCs tempting during the bubble - how else could we all suddenly feel rich.