For some, home equity is the stuff dreams are made of

Forget debt consolidation. Never mind the remodel. Some Southern California homeowners, flush with home equity, are using the American Dream to finance the Hollywood one: Make a movie. And much more.

The stack of cash that property holders accumulated over the last few years by virtue of owning in one of the hottest real estate markets in the country is gold to be mined -- and many are mining it.

Only a lack of imagination or really bad credit stands in the way of funding the next hit at Sundance. Or a new Porsche Boxster to drive to the premiere.

“They’re buying boats, cars, second homes, and some people just live on their equity,” said Marc Shenkman, owner of Priority Financial Network in Calabasas. “I tell them, ‘Don’t go to Vegas with it.’ ” Not everyone listens.

Although most owners don’t blow their home equity at the craps tables, mortgage broker Robert Weiss, owner of Rockland Financial in Woodland Hills, did help a borrower get a home-equity loan to pay off a $40,000 gambling debt, he said. “Just in time for Super Bowl.”

A year and a half ago, Weiss used his own home-equity money to purchase racehorses. “I didn’t make money on that,” he said. “The horses broke down and I sold both of them.”

And what Schwab’s Drugstore was to Lana Turner, home equity is to today’s Hollywood: a pathway to getting discovered.

Bob Golub, 48, is a father of three and has been a stand-up comic for the last 26 years. He and his wife, Emilie, bought their West Hollywood home about six years ago for $305,000. The house is now worth close to $1 million.

Taking chances

What’s an aspiring filmmaker to do?

Open a home-equity line of credit for $250,000 and spend it on house repairs, a new car and, most important, financing a semiautobiographical comedy about growing up in a huge, wacky household in Sharon, Pa.

Golub completed the principal shooting over the summer and is editing the movie now. So far, the film has cost about $35,000. Equity money also was used to live on while the movie was being made, Golub said.

“I was willing to take a chance,” said Golub, who wrote, produced and stars in the film. “It’s definitely a risk, but with all this equity in my house, when will I have an opportunity like this again?”

Actress Patricia Heller, who had roles on “CSI: Crime Scene Investigation” and “Without a Trace,” and her husband, TV and feature-film writer Bill Vought, a writer on Steven Bochco’s 2000 TV series “City of Angels,” recently financed his noir thriller “Johnny Virus” with funds from their home-equity line of credit.

Their Studio City home is now worth about $1 million; they paid $575,000 six years ago.

Digging into the equity was a difficult decision, Heller said, because “we’re from the Midwest, and our sensibility is that we just don’t do that.” But fulfilling their dreams trumped their worries.

The finished film already has a potential buyer, said Heller, who acts in the movie.

“It was risky, financing this film, but with risk come opportunities,” Heller said. “Once the film is sold, we’ll pay off the equity loan and get those French doors I want.”

Americans aren’t shy about using their home equity right now, when there is so much of it available.

Home-equity loans and home-equity lines of credit made up about 39% of all mortgages originated in the first half of this year, according to the Mortgage Bankers Assn.

But mortgage bankers caution borrowers to avoid using the money for quixotic purchases, which will require long-term payoffs, such as luxury cars.

“The worst thing you can do is draw from an equity line for something that will be on the loan for a long time,” said Mitch Ohlbaum, president of Legend Mortgage in Los Angeles. “Most people are stuck paying for equity lines when they’ve already traded in the car.”

Exercise prudence

Interest rates for equity lines of credit are tied to the prime rate plus an amount -- typically at least 1% -- determined by the borrowers’ credit score, income and the home’s value.

Prime rates fluctuate, though. Some equity lines that started at 4% one year ago are costing borrowers 8% today.

The Federal Reserve Board is expected to continue to raise short-term rates, resulting in ever-higher monthly payments for borrowers.

“I’m getting a lot of stressed calls about the rates going up,” said Dan Weiss, a mortgage broker at Golden State Lending Services in Toluca Lake. “Refinancing is an option, but all rates are going up.”

What attracts homeowners to equity credit lines is the ability to use as little or as much of available credit as they like, and they pay interest only on the amounts they’ve pulled out. Additionally, they get immediate access to the funds using credit cards or checks.

Some brokers recommend that borrowers limit their lines of equity credit to $100,000 and use the money for purposes that can be repaid quickly.

Borrowers who want the money for items such as college tuition are advised to get home-equity loans, which feature set interest rates and payments that are amortized over a longer span, brokers say. Their watchword is prudence.

“I’m not going to ruin my kids’ college funds so I can make a movie,” amateur filmmaker Golub said. “We’re not going to lose the house.”