But as one looks into utilizing the equity in their home, one needs to look at the possibility that the house could decrease in value. When that happens, an overextended borrower can end up with debt that exceeds the value of the home it's secured against. People caught in this predicament can't sell their homes in most instances unless they can come up with the difference between the amount owed and the sale price at closing. The risk becomes worse if the homeowner has borrowed more than the home is worth. In today's rapidly appreciating housing market, some companies are willing to loan 125 percent of a home's value.
Borrowers can stay out of trouble by limiting the amount of debt they're willing to accept.
Lenders' actions restricted Still, most borrowers need not worry that their lines of credit will evaporate if home values reverse course and start falling. While lending contracts typically allow banks to block future advances or close outstanding lines when customers default on their payments, they don't let companies call in loans on account of falling property prices, experts say. You can't always do that even if valuations on the property fall. It's tricky at best. The only exceptions would be in extreme cases, lenders add.