I have about $25,000 in home equity right now. Is it possible to get a loan from that to invest in stocks? If so, what would be the best way to do that?
2007-12-04 15:51:17 · 5 answers · asked by andrewhagar21 1 in Business & Finance ➔ Investing
You may be able to get a home equity loan or line of credit, and then use the borrowed money to invest in stocks. But that's very risky. You probably know that today's real estate market is tottering. A lot of people took out mortgages that have adjustable monthly payments, and are defaulting. Even if you don't have such a loan, the other homeowners around you who do can push down the value of your home if they default or go into foreclosure.
If you borrow against your home equity and put the money into stocks, you would be layering stock market risk on top of the home's real estate market risk. What if the stock market goes down? You'd still have to pay the debt back but you would have lost some of the money you'd like to have to repay the debt. And, given the shakiness of the financial markets right now, there is a serious risk of a stock market decline.
If you pile enough risk onto your house, you have a good chance of losing it. Don't borrow against your home equity to invest in stocks.
2007-12-04 19:04:13 · answer #1 · answered by Uncle Leo 5 · 0⤊ 0⤋
You can, but I agree it's a very bad idea. Your home equity loan will cost you 8, 9, 10% interest. So just to break even, you have to make enuf (in the market) to make the interest rate on your loan.
And the market averages 8 - 12% a year. That's over the long term. During the 2000 - 2002 bear market, the s&p500 lost 45% of it's value. And even if you make money in the market, you still have to pay capital gains (taxes) on this income.
If it was me, no way would I take my home equity & invest in a struggling stock market. I would take my 25k equity & try and get rid of PMI.
2007-12-04 20:46:50 · answer #2 · answered by exactduke 7 · 0⤊ 0⤋
Make sure that:
1) You can you pay the loan even if you lose the whole $25,000
2) You want to have only risky assets, no "safe" assets (this is the kind of investment strategy that gets asset managers thrown into jail)
If you still think it is a good idea, then
yes, you can probably get a home equity loan for your $25,000.
2007-12-04 16:05:12 · answer #3 · answered by G_U_C 4 · 0⤊ 1⤋
Pay it into the mortgage. The sooner you own the home the better. You'll have no payments which is that much less to worry about. You could also invest in home repair/updating in things that will increase house value such as a new yard or kitchen/bathroom. But overall unless you can find out a way to consistently make more than 6.8% interest you are better off keeping the money in your house until you may or may not need it.
2016-05-28 06:05:02 · answer #4 · answered by catarina 3 · 0⤊ 0⤋
You can, but its a bad idea. A very bad idea.
2007-12-04 16:00:57 · answer #5 · answered by jeff410 7 · 0⤊ 0⤋