Pulling the Equity Out of Your Home?
I have a lot of people ask me if it is ok to pull the equity out of their homes.
I tell everyone the same thing - Don't pull the equity out of your home unless you are going to do one of the following three things with it:
1) Buy another home.
2) Start a business. I know it's risky, but it is also part of the American Dream. If you think you have a good idea and you are willing to take the risk, go for it.
3) Invest in other opportunities that you are well versed (stocks, mutual funds, etc.). PLEASE NOTE - there are inherent risks in all forms of investing. I only recommend this one for people who are professionals or have professionals working on their behalf. The costs involved in these investments sometimes outweigh any monetary gain.
Did you notice what I didn't put on this list? Paying off credit cards. Why? Because it isn't worth it in my opinion. First off, budget yourself properly and you won't need to worry about credit card debt. Second, your equity in your homestead is safeguarded against many creditors. Everything on your credit card is free game. Say for example you cannot pay some unexpected medical expenses. Medical companies cannot put a lien against your property and take your equity in your house (see homestead law post). They can however take the other stuff.
Got some other reasons to pull your equity? I'd love to hear them. Post them here for everyone to review.
Jason Tangen, GRI - Real Estate Broker Associate with Edina Realty St Cloud MN
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