When Can a Bank Freeze a Home Equity Line of Credit Account?
A home equity line of credit (HELOC) is based on the amount of equity you have in your home. Equity is determined by your home's value less the amount left on your mortgage. If your bank freezes your home equity line of credit, it means that you can no longer draw on the line and do not have access to the money, however, you must continue to pay back the loan. There are a few circumstances when a bank may freeze your HELOC:
• Home Value - If your home value decreases significantly, so does your equity. This may cause your bank to freeze your HELOC as the value of your home is the collateral.
• Negative Equity - Home values dropped dramatically lately, causing homeowners to have negative equity, which means they owe more than their home is worth. This could cause a freeze on your HELOC.
• Credit - If the bank determines there has been a significant change in your financial circumstances, such as job loss, it may freeze your HELOC to minimize its risk. If your HELOC has been frozen, be sure you continue to pay on time particularly if you have deposit accounts at the same bank. The lender can transfer funds, without your permission, to pay back a defaulted loan.
If your HELOC has been frozen or any bank account has been frozen, we can help! You can
contact us online or call The Law Offices of Jacoby & Jacoby at 631-289-4600 to schedule a FREE consultation so we can assist you with your legal needs.