In 2003, when the economy was going gangbusters, my home was valued at $700,000 and I had a 20-year mortgage for $170,000. My home was only three years old and was purchased for $250,000. Talk about building equity!
In January 2004, my husband and I foolishly bought a franchise business. We took out a home equity line of credit of $70,000 and a $50,000 small-business line of credit. A few months later, the bank officer recommended we take out a home equity loan of $125,000 and pay off the credit lines, but keep them open (just in case). Then, the bank officer upped the HELOC to $108,000.
The franchise did not do well and I kept borrowing from the lines of credit to pay business expenses. Then, my husband and I split up. Eventually, the credit lines were maxed out. I now have three mortgages totaling close to $400,000. The home was put on the market late last year with an asking price of $650,000, which was lowered in August to $499,000.
So, in 2003, I had more than $500,000 worth of equity and six years later I have less than $100,000. Foolish ...
-- Michelle, Virginia