Is Your Home Equity Line of Credit Safe?

Many lenders are freezing home equity lines of credit, or HELOCs, even those that remain unused. Declining home values and an uncertain economic outlook are making financial institutions tighten their purse strings.

In fact, about 79% of banks surveyed recently by the Federal Reserve are tightening lending standards on HELOCs. If you still have money available in a line of credit but home prices in your area have declined, your lender may be ready to pull the plug on your HELOC.

So what's a homeowner to do? Drain the remaining balance on your line of credit and start paying interest right away or potentially lose access to your funds altogether? Before rushing off to withdraw the money from your line of credit, consider whether that approach makes the most financial sense for you. ...