The zero equity line was used because some people do have zero equity...or very little. Some of the hottest loans available are interest only because people want that McMansion right now. This phenomoen is a growing trend. Just like CC debt. I was raised up not to have any. However young kids today have grown up with it and the monthly CC big payment is just looked upon in the same way as a house or car payment.
I talked with a banker friend who has been in the business for 30+ years. He said back when he started if someone came in with a second mortgage or even asked for a second mortage they were looked down upon as someone who was careless with their money or had financial troubles. It was actually sort of taboo to take out second loans back then. It was just something that was frowned upon...even by people with the mortages. They wanted to get out of debt not add more.
Today banks are pushing people into them and they are easy to get..My particular bank I can just call up and get a check later that day. Back then you had to go through an approval process which might take a week or so.
The trend over the last 4-5 years is to take out your equity and spend it on boats, vacations CC debt etc. look at all the 110 115 or 125% loans available today.
My whole original point was that real estate brokers have been telling me that they are seeing less equity correaltion vs the homes value versus the numbers years ago.
No doubt. And yet, even with all this borrowing and spending, home equity in 2000 was 57.7% and in 2004 was 56.1%. At this rate home equity will be 0% in 35 years. I won't be holding my breath.