How You Can Loose Your Home Equity Line of Credit

How Can This Be Avoided?

Lines of credit in Australia have been a simple way in which individuals are able to access money which is secured by their personal homes. However what were to happen if the lender were to cancel that line of credit? How can this situation be avoided?my brokers in sydney

How does a Line of Credit Work?

A line of credit makes it possible for an individual to gain access to their homes equity to borrow at home loan rates for whatever purpose is needed. Your equity is merely the balance of your home’s worth and what i still owed on it.

We hope that over the years that value of your home increases, so even if a significant amount of the loan has not yet been paid off, the home’s equity and real worth will have increased.

Although obtaining a line of credit may be a successful way in which your debts can be consolidated at interest rates which are low, a line of credit could also cause you to not pay very much off of the main loan and eventually even falling behind.

Keep in mind that every time your line of credit is accessed, whether it be to take a trip with the family or purchase a new vehicle, the equity on your own home is being worn down.

Three Reasons Why Your Line of Credit Could Be Revoked

  1. If the Application Was Not Filled Out Honestly

If all relevant details which could have an affect on the decision to lend the money were not fully disclosed to the lender, in this case the facility could most certainly be withdrawn. There are times in which people make the value of the property larger than it is or perhaps exaggerate their ability of being able to pay back the loan through personal financial conditions. If these misinterpretations come to light, the line of credit could immediately be revoked.

  1. You Go Beyond Your Credit Limit

Many times it seems as if for some borrowers, the temptation of easily being able to access funds is too big. There are those who are not able to control how they spend and must have their repayments altered in a way that they can more easily meet them, there are also situations in which unfortunately, the credit is completely withdrawn because of the bad account conduct.

  1. What if Your Circumstances Change Dramatically?

Almost every kind of loan document insists on the borrower informing the lender if there is any change in the financial situation which could have an affect on being able to pay the loan back. In cases which are extreme, this may be bankruptcy related or if the main provider has been imprisoned or died. If these circumstances are not promptly communicated to the lender, they may begin cancelling the loan.

Standard Terms and Conditions

Many loan documents may contain a common clause which states as follows:

“Refusing to provide further credit at any time without first notifying you is something we may choose to do. Your credit limit may also be reduced or canceled at any moment without prior notice. If the credit limit is cancelled you may be asked to pay the pending balance in full immediately.”

                                 

What Can Be Done If a Line Of Credit Was Cancelled?

If the unlikely event of having the line of credit revoked were to occur, depending on the reason the loan was revoked there are three options that can be considered:

  1. Have the Line of Credit Promptly Converted Into a Standard Loan

If you are able to meet the loan criteria, this is the best option especially if the lender is willing to waive any establishment fees as well as costs upon termination.

  1. Refinancing With a Different Lender

This may be a very difficult if not impossible option which will vary depending on each situation. However, the financial market is in constant change and many new products that will fit your personal needs may arise.

  1. Get Rid of the Security Asset- the Home

Obviously this would be the worse option and is usually played out when there are no other possibilities. This is only done if mortgage refinancing due to the significant drop in a home’s value or if all equity which is available via a line of credit prior to the facility being withdrawn has been used up. This is when a lender that will lend more then the worth of the home cannot be found.

In Conclusion

It is crucial to know and understand all terms and conditions associated with a line of credit, this is especially true when what is in play is your home. Before entering these kinds of agreements it is important to know where you stand and any areas of uncertainty must be fully discussed prior to proceeding. A line of credit can be a very useful asset to your financial state, but as with any loan you should always practice discipline and restraint and steer clear of temptation.

The Final Resort: Claiming Bankruptcy

By going bankrupt you are relieved of all your debts, this however should really be the last resort. This generally means that over a period of three years you are bankrupt. There will be many restrictions on what you will be able to own and anything that has real financial worth , an inheritance for example, will immediately go to your creditors.

 

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