I'm out of all debt, have a large amount of equity in the house, and as we come up on the 'socialist uncertainty' of the Dem Administration, I'm worried about losing my job and being cash poor and equity flush.
If I roll out a 'low interest' home equity loan now while I have a job, and keep that cash on hand in some lower risk instrument I can get to, then I can payoff the loan if I lose my job and live off the 'winnings.'
If you lose your job, then you CAN'T get an equity loan after the fact because you're a good credit risk only when you don't need it.
And if the dollar does continue to fall, then I can pay back my loan with cheaper dollars form my paycheck.
“Stop thinking that the most important thing is having equity in your house (which earns a zero rate of return, by the way), and learn why you can save more money by having a mortgage than by trying to pay it all off. “
http://www.realwealthvision.com/Reviews.htm
I personally know this person, and did exactly what she suggested last year.
One of the biggest advantages of taking out the equity is in case of loss of job. The bank will treat you as an untouchable. They would rather foreclose a property with a lot of equity and are more likely to deal with you if you have a high loan to value.
If you take money out there are several ways you may make more than the cost of the loan.
“Isn’t the real point whether or not you have the discipline to hold on to the equity in iquidity, vs having it locked up in the house-—where you’re unable to splurge it?”
Leverage can be a good thing. HOWEVER, given the large amount of consumer debt already out there and the low savings rate, I question whether most people have the discipline to invest the proceeds and not spend the money. It’s also a different issue to risk your personal shelter in the process.