Some financial advisers have been urging clients to remove the equity in their homes. They claim that access to equity will be a financial boon in the troubled times to come. The Pittsburgh Post-Gazette reports:

“When done correctly, it is not only a way to preserve net worth you already have, but also build wealth,” said Dave Muti, author of “Mortgages: What You Need To Know,” and a senior planner at Millennium Home Mortgage in Parsippany, N.J…

Conventional wisdom would suggest that a debt-free home is the true path to financial freedom, but another school of thought promoted by some financial experts is this: It’s risky and bad planning for people to have too much of their net worth invested in their primary residence.

They say the same homeowner that would be inclined to hold 75 percent or more of their net worth in one piece of real estate — their home — would probably cringe at the idea of having 75 percent of their total stock portfolio in one single stock.”

It’s undeniable that the misuse of home equity loans has lead, in part, to the current housing crisis. Many homeowners are unable to sell their homes because their equity loans exceed the current value of their property. However, this idea is definitely worth some considerations on an individual level.

The prime rate used to determine the interest on most HELOCs is lower than it’s been for a very long time. Some homeowners may be able to make money simply by putting the money in guaranteed investments such as high-yield CDs.

See also:

Can a Lender Lower or Freeze Your HELOC?

Strategic Withdrawals to Avoid the HELOC Freeze

Tags | Heloc, heloc freeze