Home Equity Benefits Dont Be Caught Saying I Wish I Would Of

The accelerating prices of homes in many parts of the U.S. have created substantial equity positions for homeowners. The available equity sitting in the home is a lure for financial advisors (who would like you to invest through them). The homeowner now has gained a large potential financial asset that he wants to protect.



What should be done with this equity, if anything? Many financial strategist advise that you should maximize your mortgage to gain the tax advantages; and place the money tied up in equity into a safe, liquid, investment with good return and tax benefits. This is best achieved when you borrow on a tax-deductible, simple-interest basis and invest the loan proceeds in investments that compound in a tax-favored environment.



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Personally, I become wary of advice that encourages an increase of personal debt, but if you own a house free and clear, or owe on a mortgage, the property appreciates the same. The amount of equity has nothing to do with the appreciation. The concept that you can get rich by tapping into your home equity and investing the equity funds, needs to be weighed out with caution.



"A mortgage is leverage by which you can purchase a $300,000 asset -- a house -- with only $30,000, Without this leverage, home ownership would be unattainable for many people. If you had $300,000, you could purchase the home free and clear, or you could purchase it with the same $30,000 leverage and put $270,000 into a secure investment and earn interest. Your home will appreciate by exactly the same amount in either case."



"Douglas R. Andrew uses an 8 percent, tax-free, safe, and liquid investment throughout his book to show how leveraging home equity can build wealth. Another way to look at is, if your home is paid for, you've eliminated the greatest monthly obligation of your budget - you have freedom. Instead of making interest payments to a mortgage company, you can use that money to put the kids through private college. The equity in your home is a psychological and financial safety net that you don't put at risk with out doing significant research. Take a look at and gain some real knowledge on this animal called Home Equity. You will be glad you did.



Dave Hackbart






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