Stock investing is making a wager with your home. If stocks fall further, you have a lot to lose.

There are a few smarter ways to make money with a home equity line of credit in today’s market. It does take a bit of financial savvy (comparing interest rates and terms) as well as some serious responsibility (never missing a payment).

If you’re up for it, consider this tip from a recent BusinessWeek article:

“…those who can still tap their HELOC can use it to build up cash and, in rare cases, make a little money. If your HELOC rate is 5% or lower, consider drawing down that cash and buying a one-year certificate of deposit that’s yielding north of 4%, says John Ulzheimer, president of consumer education at Credit.com. You’ll also get a tax deduction, which can help make up for the difference. “If HELOC rates go up, pay down the money and you are off the hook,” he adds. The main point is to gain access to cash, with the arbitrage a side benefit.”

Remember to invest smartly. Choose investments that are insured by the FDIC and that you can break early if neccessary.

See Also:

Using a Home Equity Line to Buy Stocks

5 Financially Sound Ways to Use Your Home Equity Line of Credit

The New York Times recently published a helpful article detailing some of the ways people are temporarily investing their HELOC funds.  Here’s a blurb:

“Those who withdraw their home equity should consider putting the cash into a certificate of deposit, a savings account or a money-market account, Mr. Ben-Ami said…

Short-term liquidity is a key advantage, as borrowers may well be using their credit lines for college tuition bills or as emergency funds if they lose a job or face a major home repair.

Interest rates paid by C.D.’s were at least 3 percent last month, Mr. Ben-Ami said. “So on an equity line of $100,000, the annual cost of this strategy is approximately $1,000” — the difference between a cost of 4 percent and income of 3 percent, he said.”

These all look like good options for borrowers who need to tap their HELOCs in the coming months. Savings accounts and CDs are particularly good choices. But, whatever you do, don’t store your borrowed money in the stock market.

See Also:

Facing a HELOC Freeze? Here’s Where to Send Your Complaints

Some Advisors Urge Homeowners to Withdraw Home Equity

Strategic Withdrawals to Avoid the HELOC Freeze

The downside of withdrawing funds from your HELOC is that you will be charged interest until you pay back the money. Many people take out HELOCs instead of home equity loans because they want to have money at their disposal and not pay interest until they choose to withdraw. Removing funds from your HELOC now negates that benefit.

If you were hoping to withdraw from your HELOC sometime later this year, you may be able to counterbalance the interest charges by putting the money into a high-yield savings account or CD. San Francisco mortgage consultant Julian D. Hebron recently published a helpful blog post that shows how HELOC borrowers can withdraw money from the HELOCs now and still come out ahead of the game:

If borrowers have open lines of credit they were planning to access during 2008, they should strongly consider taking a draw now, before an unforeseen limitation on their ability to access their equity. The Prime Rate is the benchmark rate for HELOCs and is currently 6%. HELOCs are priced at Prime plus/minus a base rate. The current average HELOC rate for a good credit borrower with some equity is about 6.5%. In most cases, interest on HELOC amounts up to $100,000 is tax deductible. If a borrower is in a 33% tax bracket, the after tax rate on this money is about 4.355%. So if they took a HELOC draw and placed it into a CD or another similar liquid vehicle earning approximately 4.5% (or 3.015% after tax), they can ease the cost of those funds on an after tax basis.

If you’re looking for a place to keep your HELOC funds until you’re ready to use them, there are several competitive options right now:

Countrywide is offering a 6-month CD with a 4.10% APY. The minimum balance is $10,000.

Primer America is offering a 6-month CD with a whopping 7% APY. There is a $1000 minimum and a $5000 maximum. Because Primer America is a credit union, you may have to meet certain requirements (live in a particular area, have a particular employer, or pay an application fee) to join.

If you’d rather keep your HELOC funds liquid, Washington Mutual is offering an attractive savings account with 4% APY, when the account is linked to a free checking account.

See Also: What to Do if You’re Hit by the HELOC Freeze