Home equity advice from Michelle Singletary
Photo: Eric McNatt
During the long real estate boom, homeowners were persuaded by lenders that using their homes' rising value to pay for new cars, big weddings, or college tuition was a good financial move. Maddening credit card debt was reason enough to take on a second house loan—as was, in some cases, a chance to invest in the stock market.

Home equity lines, in particular, became like, well, credit cards. After all, they're structured much the same way: You can borrow up to your limit all at once, or take small amounts as you need them.

By 2006, some 24 percent of homeowners had bought a car or truck with a home equity line of credit, according to the financial services research company Synergistics Research.

When the boom ended, however, home equity evaporated. Once-giddy lenders tightened their standards for who qualifies. Even homeowners with unspent funds in their lines of credit are seeing them snatched away.

The fix we're in actually began with a well-intended change to the tax code back in 1986. Congress, concerned that consumers were spending too freely, stopped letting us deduct interest paid on personal loans from our taxes. Suddenly, credit card and car loans weren't such cheap money. Determined borrow-and-spenders embraced house debt instead, which had retained its deduction.

You may be thinking: If I can still write off the interest on a home equity loan or line of credit—assuming it's possible to qualify in the current climate—that seems like a smart way to get extra cash, right? Not so fast. Let's take a look at the most common reasons people take on home equity debt. Then ask yourself if there's a better way to finance the things you want.