Your House Isn't the Cash Cow It Once Was

Do you think of your home as a potential cash cow?

That's how many Americans viewed their homes in recent years, borrowing substantial amounts from their equity as values rose. But incurring significant home-equity debt may no longer seem like a good idea to those borrowers, now that values have declined in a stagnant real estate market.

The U.S. Census Bureau estimates that 68.2% of Americans own their homes. But the amount of equity in those homes dipped to 50.4% in the third quarter of 2007 -- the lowest level on record, according to the Federal Reserve.

"Everyone and their mothers are in over their heads," says Scott Rinehart, an Atlanta-based mortgage loan consultant for Lenox Financial.

Rinehart says he fields five to 10 calls daily from cash-strapped homeowners whose mortgages are nearly 100% of their home values. "They can't afford their payments, and there's nothing we can do to help them," he says. Lenders generally won't refinance properties with such high levels of debt.

We asked financial experts what homeowners should consider before borrowing from their equity in the present declining market, and what they should know about the equity line they may already have. Here's what advisers say:

Get an appraisal: Borrowing without knowing your home's value is like selling stock without knowing how many shares you own or how much they're worth. You can find an appraiser through the Web site of several industry organizations, such as the American Society of Appraisers in Chicago.