Would it be worth it to take out a home equity loan and put the money into a mutual fund instead?

Question

The equity in my property is rotting away; I'd like to make better use of it.

Answer 1

Between the loan origination fees and paying 7%-8% on the equity line, you would be hard pressed to return anything of significant returns. Or if you can get good returns, then your risk ratio is probably too high. If you could earn 10% on a fund, but pay 8% on the mortgage, they you're earning a net 2%. On a $200,000 equity line that's $4,000 a year, not that great for a $200,000 risk.

Answer 2

All of the above reasons....PLUS.. you have to keep paying on that loan every month !! Your mutual fund probably won't keep up !! ( lots of ups and downs, sometimes)
I have a lot of confidence in the markets and their ability to make money, but there is no sense in that kind of risk......even a REIT or a Trust that pays a monthly dividend would just barely keep you " in the game"
You may be better off looking into some small income property as an investment ( equity as down payment) in a while if you don't like the biz, you still have the property to sell...at a profit in 95% of the cases.

Answer 3

First you need to remember that you could potentially lose money if you invest in a mutual fund, or any other investment with some risk. Also, even if you don't lose the money, let's say it earns a 3% return. Your home equity loan could be much more than that. Of course, many banks offer the first 6 months 0% interest. You really just need to decide whether you are willing to risk losing money. Only invest what you couldn't recover. Think worse case scenario in any decision you make.

Hope this helps!

Answer 4

genuine traders have been making an investment all alongside. while all and sundry else starts off pouring in, that's too previous due via fact the bubble is forming. seem on the housing bubble. The time to purchase replace into mutually as definitely everyone else replace into in a panic and expenditures have been LOW. If something, now would desire to be the time to sell to all the fools speeding into the marketplace and utilising fees up. Unemployment remains intense. Many shares are puffed up. This feels like a bubble. Bubbles wreck.

Answer 5

I have found it out the hard way, 'mutual funds are also subject to market risks' and the markets are risky. U could loose money, including the capital u pay, on the mutual funds and may find it difficult to pay off your loan.

Answer 6

I know people who have done it; I would talk to a financial planner first. A high interest rate on your home equity line can eat away all of your profits, and you need to consider how much risk that you can stomach.

Answer 7

You may be able to get a HELOC. You may be interested in this new program. It works well with a 30 year mortgage. I am currently using a HELOC with a new software program that helps build equity fast, and will payoff my home in less than half the time without refinancing, and without extra payments. It is saving me thousands in interest, and pays off home in less than half the years. E-mail me if interested.