Whats the best way to use home equity?

Answer 1

You can use it borrow against for the purposes of paying off higher interest debt. But this should only be done if you are willing to stop spending in the way that caused you to need to use your equity.

Answer 2

The best way to use home equity is to leave it where it is until you are ready to sell your home!

Beware. Home equity loans are secured by the home.

Here is a typical scenario: someone's "friend" tells her she should get a home equity loan to put some of her consumer debt on so that she can get lower interest rates and deduct some of the interest. She gets lower interest rates precisely because the loan is secured by tangible property.

Then one day her employer gives her a pink slip. Having no savings (if she had savings, why would she have debt?), she scrambles to pay the bills. She thinks maybe she can stop paying on the car and it will get repossessed. But the loan that paid it off is against the house not the car! The house is then seized.

So the creditor seizes the house and sells it. What if it ends up with negative equity? What if there would still have been some equity had the creditor gotten a better price for it?

If you have high-interest consumer debt (credit cards etc), then make an effort to pay them off by cutting expenses elsewhere. Then use the cash flow instead of taking on any more debt.

By the way, the tax writeoff is not net savings. You do not get rich by giving your creditors $1 and getting back whatever your marginal tax rate is (35 cents max) from the government.

Answer 3

This would depend entirely upon the homeowner and their needs wants ect..

If you are selling your home you may want to use the equity to make home improvements that would bring the top dollar or would cover the cost the would be incurred from repair and upgrades needed.

If you are planning on buying a new home then using your equity to purchase and or put a significant down payment may be your proper course of action.

If you are planning on refinancing you home for what may be a lower interest rate and feel it necessary to borrow on your equity then a purchase for home improvements, car, and or investment may considered.

Ultimately the choice is yours!

Answer 4

Home improvements. It's the only semi-sure way to make the value of your house (and subsequently your equity) go up.

Answer 5

The best way to use the equity in your home is for big ticket items such as home improvement or education. That's my opinion anyway.

Answer 6

Only use it in an emergency.

People will say, "sure...consolidate all of your credit card debt on your house!". Typically, this doesn't turn out to be the deal they expected, since this involves debt TRANSFER, and people want to think of it as elimination because their CC balances are now zero. You've probably gotten the second mortgage for a longer period of time than it would have taken you to pay off most CC's if diligent.

A lot of people use it to buy cars, too...only if the interest rate is feasible and it makes sense to do it.

If you're not going to use it for emergency purposes only, the most important thing to do is your own number crunching (don't rely on the salespeople who want to close a loan) and consult your tax advisor.

Answer 7

Take out a heloc(home equity line of credit) and invest the proceeds in safe stock ie johnson-johnson they have only lost money one year in the last forty.
The rate you pay will be less than your return.

Answer 8

buy yourself a new Cadillac Escalade with spinning dubs.
make them 26' dubs.

Answer 9

plug in a pool

Answer 10

Buy shoes.