(3) Monitor Home Equity Line of Credit; Avoid Trouble

We mentioned above about continually dipping into your home equity line of credit to pay current expenses. If you have a home equity line of credit, monitor it closely for red flags that you are heading into deep, long-term debt. Here are red flags to watch for:
1. You are using more and more of the line of credit each year;
2. You only pay the monthly minimum;
3. You are using it to pay regular expenses;
4. You are using it to buy expensive items and vacations you otherwise cannot afford;
5. When the loan gets maxed out, you apply for a new, larger home equity line of credit because your home has increased in value and continue the process.
6. You pray that your home will continually increase in value, but you know in your heart from the 2008 economic debacle that it cannot and will not.
Property values rise and fall as we saw in The Great Recession of 2008-2009. Even today, years later, many people are still “underwater” with mortgages because they took out a regular 30-year mortgage and a home equity line of credit. Be very cautious with your home equity line.