I have never personally experienced this but I’m told that the bank will sell the home to settle the debt. If the home doesn’t bring enough to pay off the loan balance, they will come after you for the difference.

Bare in mind also that there could be two banks competing for the money: the first bank is the one who gave you the original mortgage, and the second bank is the one who gave you the home equity loan.

Also, just to be clear: This was a home equity loan, and not a home equity line of credit, right?

–Dave

Do I still have to pay back the equity loan on the foreclosed house? Don’t seem like I have to being that they took what the equity loan was tied to.

johnny

Does that mean that if you have an emergency, you intend to go into debt to cover it? Is there any particular reason to not save up some cash for an emergency fund instead of leveraging your house?

By the way, congrats for having the discipline to *not* use it. That’s more than most Americans can apparently do. Also, just for the sake of others reading this later, this article was not about Home Equity LOC’s (Lines of Credit). It was about Home Equity Loans, which obviously you must pay back starting immediately after getting the loan. This is different from an LOC which you only pay back *after* and *if* you spend any of it.

–Dave

My wife works commission only and it is only there as an emergency
measure so we don’t have to cash in some IRA money or sell some
stocks if her market gets sour.

Everything boils down to one thing–discipline. If you have it, LOC’s
are great. If you don’t have it (and you know if you have it or not),
stay away from LOC’s, credit cards, etc.

I immigrated to this wonderful country about 10 yrs back. I landed here when I was 23 with literally nothing but education. Got my first job and here is the plan I stuck to.

- First thing: Took public transport to save enough money for 6-8 months to buy a car. Bought a nice car with most down and a 5 yr. loan on remainder

- Second thing: Paid off the rest of the car loan in 6-8 months.

- Third thing: Saved for a couple year and bought a house in the country where I come from.

- Fourth thing: Saved for another 3 years and bought a house in a good neighbourhood (best public school, great community, close to all major highways and public transport) which will be enough for my family for next 5-6 years. Took a loan on remainder.

- Fifth thing: Worked my rear off to pay off remainder of the home loan in 3 years.

- Sixth thing: All the this time, I will save money for the next step and use it to purchase something. So, yes there were times when I had less than 1000.00 of total savings. SCARY!!

- Seventh thing: Saved enough to last for 1 year. Kept this money aside and forgot about it. Will never touch it unless there is a real emergency.

- Eight thing: All this time my first home (outside US) has tripled in value. With the rate at which it is anticipated to grow in next 10-15 yrs, that should take care of my kids college education.

- Ninth thing: By this time my old car, which is about 10 yrs old now is no longer in the top shape. So, we are saving these days to buy a nice car that would last us another 10 yrs and will be big enough to accomodate our whole family.

- Ten thing: Next thing after that will be move to a bigger house in the same neighbourhood and pay it off before I am 40.

And lastly, I do not make more than an average person. And for all the skeptics and those who think we might have lived miserably, my first car was a BMW, I put my wife through a GREAT college and send my kids to a private school. And yes, all this time I maximized my 401k investment, which I have been growing with a decent rate of return every year.

I by no means is the best financial planner, but here is what I will tell others. Always buy things that you enjoy and are durable (10 yr rule is a good one) and always do it one step at a time. And do not listen to anyone. Good luck!

Having never been in your situation, I don’t feel qualified to give any advice, but I can at least encourage you to hang in there and get it paid off. If I were in your shoes, I would definitely call Dave Ramsey and ask him.

–Dave

At our current rate, our home will be fully paid for in 5 years and 1 month from now (we’ve been in the house for 4 years and 3 months). Currently we are making double principle payments every month on our 15-year loan. It has taken pretty serious discipline to do it, but we are certain it will be worth it in the long run.

A few years ago, back when the principle portion of our minimum payment was lower, we would make triple and even quadruple principle payments. That’s quite a bit harder now, since our minimum principle payment has naturally gone up significantly since then, but we still dump lots of money in every month.

I’m just glad we bought our first house in a time when interest rates were in the single digits as opposed to your generation, paying 15% interest or more for their first home. I don’t think we could have made nearly the progress we have with triple the interest every month.

–Dave