Using your home as your personal ATM? Bad Bad Homeowner!
OK, maybe the time has passed for homeowners to mortgage their future, for now. And THAT’S a good thing. One segment of the population that is being foreclosed upon is the people who thought they could keep living off their future equity. I know equity has become one of those words that we long to hear, but it will come back. As will rising home prices. It may not feel like it right now, but it will.
So, a word to the wise… Don’t ever borrow money against your house unless you are making significant improvements that will at the same time increase the value of your home. A large percentage of the homeowners in trouble with their banks, are in trouble because they borrowed money to finance toys and trips. Everything from an SUV to a get-a-way to Europe. With a sense that their appreciation would never end, they ran to their ATM (home equity) with wild abandon.
Maybe I’m too conservative, but I have to tell you, my clients have all gotten the same advice from us. And I also must tell you, none of my clients have lost their homes through foreclosure, whether by buying too much home in the first place or by leveraging their future.
So if you’re thinking about refinancing for any reason, talk to your REALTOR or call us. We’ll help you think it through and make an informed decision.
Happy Home Ownership !!!!!!!!
Wallace…
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3 Responses to “Using your home as your personal ATM? Bad Bad Homeowner!”
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[...] One presents Using your home as your personal ATM? Bad Bad Homeowner! posted at The Wallace & Kelly Real Estate Blog, saying, “Written by Patrick [...]
I agree 100% that using your home equity to buy toys or depreciating assets is a bad financial choice. However as a real estate investor I have used my home equity line for some very profitable investments.
By the way I found your blog via the carnival of creative investing.
Hey Ned,
Thanks for your response. I did fail to mention sound investment opportunites as a perfectly good reason to tap into your home’s equity. A good frined of mine, a single mom, tapped into her home equity line to purchase 3 “fixer” homes over a period of a year and a half. She used the profit from her first to put a new roof on her home and install a new fence. She used the profit on the second one to pay cash for a new car and she stuck the profit from the third into an account for a rainy day. Her home is now in very good repair and the credit line has been paid off. My brother and I once bought a duplex with the “cash advances” from our credit cards. It was a great deal and paid them (the cards) off when we resold the duplex. I have to admit there are some calculated risks so I can’t recommend these tactics to the unsophisticated investor. It’s the people who paid off student loans or bought new cars, motorcycles, pools etc that mortgaged their futures and lost.
Happy investing.
Patrick Wallace