Homeowners in states like California and New York have seen the worst of the mortgage crisis. But, negative equity seems to be spreading inland – making more homeowners ineligible for HELOC loans.

A recent report summarized on the Calculated Risk blog explains:

“Going forward, the largest increases in the share of negative equity will most likely occur in states that have not yet experienced deep declines. The reason: the boom/bust states already have very high negative equity shares and incremental declines in home prices will result in smaller negative equity share increases relative to other states given the same decline in prices. This means that as prices continue to decline in 2009, the rise in the negative equity share of states outside the boom/bust regions will begin to accelerate more quickly relative to the boom/bust states.”

What does this mean for potential HELCO borrowers? If you’re considering taking out a home equity line of credit, you may want to do so before your area faces an increase of negative equity. You may also want to consider other options, such as traditional home equity installment loans, to avoid the possibility of HELOC line freezes.

See Also:

Is a HELOC Right for You?

HELOC Freeze Help

Tags | equity, Heloc, heloc freeze, home equity line of credit, mortgage crisis